DISPLACING
DIESEL
ANNUAL REPORT
for the year ended 31 October 2023
Displacing Diesel
Our strategy is built around displacing diesel in strategic
markets. We do this by commercialising our three key
product offerings over the development cycle from
investment to revenue.
With our S Series H-Power Generator already earning
revenue, our strategy is to grow that revenue stream whilst
developing the S+ H-Power Generator and Fuel conversion
technology platforms to the revenue stage over the near-
term and medium-term.
STRATEGIC REVIEW
Highlights
Our strategy and business model
Chair’s report
Chief Executive Officer’s report
Chief Financial Officer’s report
Key Performance Indicators
Manufacturing Scale up – Fuel Cell
Market opportunity – Fuel Processing
Market opportunity – Construction Market
Market opportunity – Cracker Technology
Joint ventures
Section 172
Risk management
ESG REPORT
ESG Committee report
ESG Governance and Strategy
Environmental
Social
Our commitments to ESG and Sustainability
How we support the UN sustainability goals
1
2
4
6
12
15
16
18
20
22
24
25
26
29
30
32
34
37
38
GOVERNANCE REPORT
Corporate Governance Statement
Directors’ report
Board of Directors
Roles of the Board and sub-committees
Audit and Risk Committee report
Nomination Committee report
Remuneration Committee report
Statement of Directors’ responsibilities
Independent Auditor’s report
FINANCIAL STATEMENTS
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Cash flow statement
39
40
42
44
46
48
49
59
60
69
70
71
72
Notes forming part of the financial statements 73
Company information
98
HIGHLIGHTS
FINANCIAL – FY 2023 and subsequent
TECHNOLOGY being developed in FY2023
£26.6m
£27.4m
Orderbook*
Cash at
year end
£4.1m
R&D tax credit
received
S Series generator
(30kW)
S+ Series generator
(200kW)
Small scale
ammonia
cracking plant
COMMERCIAL – customers in FY 2023
ESG – progress in FY2023
Strategic and distribution
relationships
Lost time injuries Nil
Carbon footprint
ESG Committees
2022 & 2023
data captured &
compared to
2021 baseline
Focused on
developing and
empowering
our people
* The aggregate of the committed and uncommitted elements within existing contracts (see also CEO report).
DISPLACING DIESEL
1
STRATEGICREVIEWAnnual Report 2023
AFC Energy PLC
OUR STRATEGY AND BUSINESS MODEL
Our strategy is built around displacing
diesel generators. We do this through
investing in our three key product
platforms over the product cycle
from research to revenue.
DISPLACING
FUEL CELL
FUEL PROCESSING
Our fuel processing platform
is focussed on the growing
opportunities around the
fast developing global green
ammonia trade and will be
looking to deliver revenue in
the medium term.
Our S Series, air cooled,
generator is focussed on the
construction sector and is
already generating revenue.
As we continue to build
market traction with the
S Series, we’ll be developing
the S+ Series, liquid cooled,
in parallel and looking
to deliver revenue in the
near term.
2
DISPLACING DIESEL
STRATEGICREVIEW Annual Report 2023
DIESEL
PRODUCT-LED STRATEGY
Development
Development
S Series H-Power
Generator
S+ Series H-Power
Generator
Development
Fuel
Processing
Development
31/10/2023
Revenue
Revenue
Revenue
Revenue
DISPLACING DIESEL
3
STRATEGICREVIEW CHAIR’S REPORT
Leading the transition
COP 28 was held in Dubai in 2023 and renewed the focus on the
global need to decarbonise and the opportunities this is creating.
AFC Energy was represented by our CEO, Adam Bond, and with
hydrogen high on the COP agenda, there was a lot of interest in
our technology and products.
It was also a great backdrop for the fuel cell and then fuel
processing announcements we made around the time.
Strategic development
The construction sector remains our primary commercial
focus due to its reliance on diesel generators and the
I wish to thank Joe for his six-years of service and wish him
well in his retirement.
growing pressure to displace diesel when tendering
Taking over from Joe on 1 August 2023, I’m delighted to
for contracts.
welcome Duncan Neale to the Board. Duncan has both
the breadth and depth of experience in the role and in the
To this end, the joint venture announced with Speedy Hire
energy sector that will serve the Company well as we look
combines perfectly their marketing and logistical
to scale.
strength with our hydrogen fuelled equipment and
technical expertise.
Contents
The first H-Power Generator passed factory acceptance
Environmental, Social and
Governance (ESG)
A great deal of focus has understandably been on the
testing in March 2024 and I’m delighted to report that
important role that the Company’s products can play in
feedback has already been very positive, particularly from
decarbonising the environment. However, as we grow and
the potential JV customers that have visited.
start to manufacture in volume, we need to take further
The Board
Graeme Lewis retired as chief financial officer and resigned
I am pleased that Monika Biddulph has taken on leading
as a director from the board on 30 November 2022. I wish
ESG activity for the Board, and especially pleased by the
to thank Graeme for his service and wish him well
way that this has been embraced by all our employees. You
in retirement.
can see more detailed information later in her ESG report
steps ourselves as a company.
Taking over from Graeme, Peter Dixon-Clarke joined us
on 1 December 2022, bringing with him his considerable
fund raising and transactional experience from across the
energy sector.
Our employees
I would like to thank our employees for their continued
commitment to what has been a milestone year.
on page 29.
Jim Gibson resigned on 9 June 2023, and I wish to thank him
for his five years of service. Jim’s duties as chief operating
Gary Bullard
officer have been shared amongst the existing C-suite.
Chair
25 March 2024
This year saw the retirement of Joe Mangion as non-
executive and chair of the Audit Committee on 31 July 2023.
4
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC
We announced the signing of our Joint
Venture with Speedy Hire plc, named
Speedy Hydrogen Solutions (“SHS”),
and then followed that with the news,
that we had demonstrated a world first
in modular hydrogen production from
our cracker system.
DISPLACING DIESEL
5
STRATEGICREVIEWAnnual Report 2023 CHIEF EXECUTIVE OFFICER’S REPORT
Displacing diesel
The 2023 financial year saw the global hydrogen market grow with
over half a trillion US dollars of new projects in the pipeline to support
industry’s decarbonisation commitments.
In recognition of how this rapidly expanding industry is
The success of these first generation trials evidenced
evolving, and the growing importance of decarbonised
industry demand for our zero emission generators, which
ammonia as a hydrogen carrier in the facilitation of
was the impetus behind our initial Heads of Agreement with
global trade, we have commenced consideration of
Speedy Hire signed in July 2023 (which was subsequently
standalone divisions within AFC Energy reflecting both the
converted to a joint venture in the form of Speedy Hydrogen
consumption (fuel cells) and production (fuel conversion
Solutions post year end) and first commercial orders
or ammonia cracking) of hydrogen. This delineation
from Acciona and Speedy Hydrogen Solutions (post year
would reflect the fact that whilst there is a clear overlap in
end). These partnerships provided valuable insights that
technologies where ammonia cracking can facilitate fuel
informed the 30kW generator product which, post year
cell deployments, there is also a growing number of stand
end, culminated in delivery of the Company’s first Factory
alone enquiries for the cracker technology that gives rise to
Acceptance Test (announced in March 2024) and its first
a value proposition that perhaps is not currently reflected in
independent Attestation of Conformity for CE Mark from
the value of AFC Energy.
global certification agency, TUV SUD (March 2024) – both
Across our fuel cell division, in the 2023 financial year, ten
first generation 10kW H-Power Towers were successfully
This strategy has proven highly successful and whilst
deployed to customer sites predominantly in the
not reflected in the earned revenue in the 2023 financial
construction sector. The aim of these deployments
year, can be evidenced in the order book of £27m as at
massive achievements for the Company.
was to:
the date of this report highlighting both committed and
uncommitted orders on existing contracts for S Series
validate the operation of the S Series fuel cell technology
generators derived from customer contracts including
in the form of generators;
Acciona and Speedy Hydrogen Solutions. This order book
validate the plant hire business model for the UK
construction market;
would not have been possible without the investment of
time and resources throughout 2023.
validate the pain points and drivers for uptake of
In parallel with customer deployments was a programme
hydrogen powered fuel cell generators;
of cost reduction that successfully represented a 50%
obtain valuable customer feedback to build into
subsequent H-Power Generator platforms;
fall in component and material costs brought about by
engineering and scaled component procurement. This
cost down approach to the H-Power Generator platform
generate nominal revenue from the weekly rental of
has continued to evidence further value enhancements
H-Power Towers; and
into 2024, including the confirmation of a robust and
validate a contractual order book of new generator
orders.
6
globally diversified supply chain across all key components
positioning AFC Energy well for manufacturing scale up.
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC This strategy has proven highly
successful and whilst not reflected in
the earned revenue in the 2023 year,
can be evidenced in the order book
of £27 million.
DISPLACING DIESEL
7
STRATEGICREVIEWAnnual Report 2023 CHIEF EXECUTIVE OFFICER’S REPORT
CONTINUED
The growing displacement of the global diesel generator
production of hydrogen at the point of demand. Since
market represents a US$20bn per annum opportunity
launch, we have hosted many visitor groups from across
which, through tightened regulation and emission
the Globe to the site, reflecting industry’s growing interest
standards, corporate sustainability targets, and rising costs
in ammonia adoption as a clean and sustainable fuel of
of compliance, makes AFC Energy’s H-Power Generator
the future.
an increasingly viable alternative to support industry’s
roadmap to a decarbonised future.
The vast adoption of diesel generation by industry,
Speedy Hydrogen Solution (“SHS”)
Joint Venture
SHS, our new joint venture with Speedy Hire, signed in
whether for prime or backup power, creates a sizeable
November 2023, is a market first and aligns perfectly with
prize to chase, however our immediate focus remains
our stated business model of selling H-Power Generators
on the construction market with its immediate
wholesale to plant hire companies for onward rental to
decarbonisation challenges.
the construction sector and temporary power markets.
Throughout this overview, a theme resonates with all our
The UK construction market is aggressively moving
partners, that the time to displace diesel is now and whilst
towards the displacement of diesel generators with
it will take time to transition from the material sunk cost in
high profile projects such as HS2 stating there will be no
diesel generators in the market today, the pressure to find
diesel generators on site by 2029. Speedy Hire and SHS
alternative off-grid power solutions is imminent.
are aiming to step into this void with viable alternative
technologies that include hydrogen fuelled generators.
Our fuel conversion division has also reached new
milestones during the course of the year culminating in the
Since announcement of our first Heads of Terms with
launch of the world’s largest modular, scalable ammonia
Speedy Hire in July 2023, market demand for the H-Power
cracker platform in late 2023. Much of 2023 was spent in
Generators has exceeded expectations and will
the design, engineering and build phase of this platform,
surpass first year orders based on current business
including the launch of the Company’s next generation
model projections.
ammonia cracker which is designed for low cost, efficient
The UK construction market is
aggressively moving towards the
displacement of diesel generators
with high profile projects such as
HS2 stating there will be no diesel
generators on site by 2029.
8
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC Post year end, SHS committed to an initial £2.0m
TAMGO are marketing both our S Series (air cooled) and
purchase of generators from AFC Energy. The generators
S+ Series (liquid cooled) H-Power Generators to end-
are to be delivered during the first six months of calendar
customers in the industrial and off-grid power markets in
year 2024, with the intention of increasing orders for the
the Kingdom of Saudi Arabia and a further 16 countries in
first full year (12 months ended 31 October 2024) up to
the MENA and surrounding region. Several client proposals
£4.7m. The initial focus of orders is on the S Series air-
have already been submitted to Saudi companies seeking
cooled fuel cell platform sized at 30kW.
to adopt hydrogen as part of their off-grid power solution.
The generators are exclusively available for hire, via Speedy
TAMGO will provide local customer support with on the
Hire, to its customers, in the UK and Ireland. This exclusivity
ground maintenance and servicing of our generators,
will apply for an initial three-year period subject to an annual
along with engineering, design, commissioning and logistics
minimum order quantity which increases each year.
support direct to customers.
Speedy’s customers have already shown strong interest and
We continue to believe this region presents unprecedented
established a growing pipeline of demand, driven particularly
growth potential for the H-Power Generator platform with
by changing tender requirements and emission regulations,
additional benefits of working with a partner with strong
where UK infrastructure and construction projects are
pedigree in localised manufacturing capability within the
targeting the removal of diesel generators by as early
Saudi market. This positions AFC Energy and TAMGO to
as 2029.
create a market leading positioning for our technology
TAMGO distribution agreement
In September 2023, we announced the signing of an
exclusive distribution agreement with Saudi Arabia’s The
ACCIONA
In April 2023, having hosted our first 10kW H-Power Tower
Machinery Group LLC, which trades as TAMGO.
trial in 2022, ACCIONA was the first to sign a lease for our
within the MENA region.
new 30kW H-Power Generator for a six-month period with
TAMGO is an approved vendor to many of Saudi Arabia’s
an option to purchase the system at a pre-agreed price.
largest infrastructure and mining projects including
NEOM, Red Sea Global and Qiddiya. In a number of these
As part of the agreement, a battery storage unit will be
projects, the target of displacing diesel generators is
harmonised for operation with the fuel cell generator,
within the current decade, and so presents a near-term
providing a total 50kVA nameplate generator package.
growth trajectory further supporting our business model
The combined system is expected to undergo factory
of partnering with dealers and plant hire businesses which
acceptance testing shortly with deployment to
provide immediate access to global markets in a timely
Spain thereafter.
cost efficient manner, enabling the Company to meet the
accelerated path to decarbonisation many construction
projects are on.
DISPLACING DIESEL
9
STRATEGICREVIEWAnnual Report 2023 CHIEF EXECUTIVE OFFICER’S REPORT
CONTINUED
ABB E-mobility (ABB)
In March 2023, we announced the successful operation
and validation of our first high-power density, liquid cooled
Fuel Processing –
Modular Ammonia Cracker
Ammonia has continued to gain international importance
fuel cell stacks with ABB E-mobility. The stacks, referred to
as a clean hydrogen carrier fuel with the announcement
as the “S+” Series (as distinct from the Company’s “S” Series
of billions of dollars in new ammonia production plant
air cooled technology), were delivered to Germany for
investment during 2023. With global hydrogen trade
successful independent validation in October 2022.
expected to be facilitated through the shipping of clean
ammonia at scale, the importance of ammonia cracking
Since then, our engineers have been designing and testing
and the reproduction of hydrogen at the point of demand
the 200kW generator packaging and, following receipt
from ammonia, is also growing in importance.
of our new 140kW (gross) fuel cell stacks in 2023 and long
lead component ordering, we are nearing initial operation
AFC Energy remains at the forefront of distributed
of the 200kW H-Power system. This is a landmark moment
ammonia cracking technology with the launch, during
for our latest, complementary liquid cooled generator
March 2023, of the Company’s latest generation ammonia
technology allowing us to now achieve nameplate fuel
cracker reactor technology, and subsequently (post year
cell ratings from 10kW (air cooled) through to in excess of
end), its first, and the world’s largest, modular, scalable
100kW (liquid cooled).
ammonia cracker facility here in the UK. Delivery of the
pilot cracker facility was the culmination of two years of
Following successful validation of the S+ Series technology
technology development, design, engineering and build
with ABB E-mobility and their funding of this development,
before announcing the commissioning of the 400kg per
we entered into an agreement with ABB establishing a
day facility in December 2023. It is being used to validate
pipeline for the purchase of their first ten 200kW S+ Series
and test the design, engineering, components, operation
fuel cell generators over a defined term. The first of these
and safety aspects of the technology.
systems will be purchased from AFC Energy as part of the
revised contract, with the subsequent nine at ABB’s option.
The plant has been designed to produce fuel cell grade
ABB also invested a further £2m into AFC Energy giving
hydrogen with power consumed locally at a fraction of the
them a total equity stake of just over 2% in the Company.
power consumed by an equivalent sized electrolyser. This
makes it an ideal source of distributed hydrogen, whether
used in stationary or maritime applications.
Ammonia has continued to gain
international importance as a
clean hydrogen carrier fuel with the
announcement of billions of dollars
in new ammonia production plant
investment during 2023.
10
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC Demand for such applications is growing rapidly with
the Hydrogen Council, in collaboration with McKinsey,
forecasting that 400 out of the 660 million tons of hydrogen
needed for carbon neutrality by 2050 will be transported
over long distances, with ammonia expected to account for
about 45% of that 660 million tons.
Outlook
The 2024 financial year is all going to be about delivery.
Delivery of our first 30kW H-Power Generators to Speedy
Hire (through SHS) and its customers. Delivery of our first
50kVA H-Power Generator to ACCIONA. Delivery of first
orders from TAMGO across the Saudi and MENA regions.
To meet this demand, there is already a well-established
supply chain for ammonia, which enables a lower barrier to
its adoption globally as a hydrogen carrier fuel. However,
the lack of commercially available ammonia cracking
technologies within the existing value chain presents an
enormous opportunity for AFC Energy.
During 2024, AFC Energy will be working to design and
engineer a containerised ammonia cracker platform,
including purification technology, to enable mobile units
to produce hydrogen at the point of consumption. The
containerised cracker platform, will be a standalone
product capable of being sold to hydrogen consumers,
positioning AFC Energy at the forefront of this emerging
global market.
As an initial step in the commercialisation of this technology,
we have signed our first Letter of Intent in 2023 with the
trading arm of one of Europe’s largest energy companies
to market the potential for ammonia and green ammonia
as a hydrogen carrier fuel based on a perceived demand
for modular crackers from its customers. This is in addition
to the growing list of customer enquiries wishing to explore
the potential for networked hydrogen production through
ammonia cracking across Europe.
The ammonia cracker technology platform is an exciting
and key part of the global value chain and the strides
forward made during 2022 and 2023 continues to position
AFC Energy at the forefront of this technology.
To achieve this, we have continued to focus on the securing
of our supply chain, with component qualification taking
place across most of 2023. We are also focussing on
scaling up our manufacturing capabilities to meet the
growing demand for our generators. We plan to do this
through a combination of strategic partnerships within our
sub-assembly supply chain and a modest investment into
our on-site assembly capabilities. This will ensure effective
management of working capital.
Work on the liquid cooled generator for ABB continues,
with initial testing expected to complete within 2024, to be
followed by CE marking prior to shipping. In the meantime,
early pre-ordering of the 200kW H-Power Generator is
available with active marketing of the system already
underway with TAMGO for the Saudi market.
We continue to see interest in our hydrogen power
generators from global distributors and plant hire
businesses and so collaborative working with this sector to
support decarbonisation requirements of their customers
will also be an important part of 2024.
The Board also intends to explore options to both
demonstrate and unlock the material unrecognised value
of our ammonia cracking technology to the benefit of
shareholders through industry partnerships and other
strategic avenues.
Adam Bond
Chief Executive Officer
25 March 2024
DISPLACING DIESEL
11
STRATEGICREVIEWAnnual Report 2023 CHIEF FINANCIAL OFFICER’S REPORT
£27.4m closing cash position
Financial highlights for the 2023 financial year were:
~ £27.4m closing cash position;
~ £8.5m of qualifying R&D investment;
~ £4.1m of R&D tax credits received; and
~ £4.3m UK Government Grant awarded.
Result for the year
After revenue of £0.2m (2022: £0.6m) the Company
Cash flow summary
Net loss before tax
produced a loss after tax of £17.5m (2022: £16.4m) for the
Non-cash items
2023 financial year.
R&D credits received
Working capital movements
This loss was driven by operating costs of £20.0m (2022:
£19.7m) offset by interest earned of £0.5m (2022: £0.1m)
Investing activities
and R&D tax credits of £2.1m (2022: £3.0m).
Financing activities
Of the £20.0m of operating costs, £4.7m (2022: £5.1m)
Opening cash
related to R&D materials, £9.6m (2022: £7.6m) to staff costs
Closing cash
and £5.7m (2022: £7.0m) to other administrative expenses.
£’m
(19.6)
2.2
4.1
0.2
(13.1)
(1.2)
1.5
(12.8)
40.2
27.4
Of the administrative expenses, £2.4m (2022: £3.5m)
activities) of £13.1m equated to an average of £1.1m per
related to non-cash items, mainly depreciation and share
month, suggesting a cash runway, at similar expenditure
Operational cash burn (i.e., before investing or financing
based payments.
levels, of 24-months beyond the end of the 2023 financial
year. This cash runway will reduce in proportion to the
The reduction of expected R&D tax credits, from £3.0m to
rate at which the Company scales up its commercial and
£2.1m, is due to the changes in UK Government legislation,
manufacturing capabilities.
effective 1 April 2023, which reduced the value of the uplift
from 130% to 86%, as well as reducing the recovery rates
and tightening definitions around qualifying expenditure.
Strong closing cash position
of £27.4m
A summary of the cash flow for the 2023 financial year is set
out within the table below:
£8.5m of qualifying R&D investment
£8.5m (2022: £9.0m) of the Company’s R&D invested is
expected to qualify under the UK Government’s R&D tax
credit scheme. This was deployed as follows:
Qualifying R&D expense
Materials
Staff costs
Other costs
£’m
3.3
4.7
0.5
8.5
12
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC
The £8.5m was deployed approximately 40%, 25% and 35%
invested should still be expensed as operating costs. For
across each of the Company’s three value streams, being:
the 2024 financial year that is expected to change, due to
air cooled generators; liquid cooled generators; and fuel
the continued progress during that year.
processing respectively.
In the case of air cooled generators, the investment funded
Receipt of £4.1m in R&D tax credits
Of the £4.1m (2022: £0.5m) received, £1.1m related to the
the customer driven evolution from the 10kW H-Power
2021 financial year and £3.0m to the 2022 financial year.
Tower to the 30kW H-Power Generator, the success of
which culminated in the JV with Speedy Hire.
The Company received two years’ worth of R&D tax credits
during the 2023 financial year because it accelerated
In the case of liquid cooled generators, the investment
submission of its 2022 corporation tax return. The full value
funded the customer driven evolution from the 100kW fuel
of the £3.0m claim, lodged in July 2023, was received in
cell laboratory test to the 200kW generator unit, currently
September 2023.
undergoing laboratory testing.
In the case of fuel processing, the investment funded
construction of our pilot modular ammonia cracker.
Award of a £4.3m UK Government
Grant
In July 2023, the Company announced the award of a UK
This has been designed to a scale equivalent to a 1MW
Government Grant worth up to £4.3m to the Company.
electrolyser, meaning an output of 400kg of hydrogen per
day to fuel cell purity, and currently undergoing a series of
The grant was awarded by the Department for Energy
onsite field tests to prove out the economics and useability.
Security and Net Zero under its Red Diesel Replacement
scheme, which aims to displace diesel in the construction,
The Company has assessed each of the three value
quarrying and mining sectors.
streams against the six tests set out within the accounting
standard that need to be met before the related investment
The grant will reimburse 50% of eligible costs of the next
can be capitalised as intangible assets.
generation air cooled and liquid cooled fuel cell generators.
Based on the above assessment, the Company has
financial year and will be recorded in the Statement of
concluded that for the 2023 financial year the amounts
Comprehensive Income as other income.
First receipts under the grant will occur during the 2024
DISPLACING DIESEL
13
STRATEGICREVIEWAnnual Report 2023 CHIEF FINANCIAL OFFICER’S REPORT
CONTINUED
AFC Energy PLC
The developments must culminate in a field trial for both the
air cooled and liquid cooled generators, alongside a hybrid
Going concern
To deliver on the Company’s intention to capitalise on
battery, at one, or more, of the quarries. If the field trials are
its growing market opportunities it needs to scale up its
delayed beyond the March 2025 closing date then there is a
manufacturing output and continue investing in research and
high risk of under recovery.
development, both of which will require additional funding.
No recoveries were made under this grant during the 2023
Whilst the Board recognises the challenges of fundraising in
financial year. The first claim has now been made and
the current economic climate, it is confident that when the
receipt expected in due course.
Company chooses to seek additional funding that it will be
ABB E-mobility (ABB)
During the 2023 financial year, the Sale & Development
available. This view is based primarily on the:
recent technical successes of both the fuel cell and fuel
agreement with ABB was revised by both parties. Under
processing teams;
the revised agreement, ABB has, for a pre-agreed total and
defined term, a discount to be spread over the purchases of
the first ten eligible fuel cell systems.
UK Government requirements for construction tenders
to include a non-diesel solution for onsite electricity
generation;
The total cash value of the original contract was £4.0m and
growing levels of interest expressed by the construction
this remained unchanged after the revision, with £2.0m
market in the recent joint venture with Speedy Hire plc;
having been received in the 2022 financial year and the
£2.0m balance received in the 2023 financial year in return
positive feedback from external advisors; and
for the purchase of newly issued shares in the Company.
growing levels of institutional engagement, in both the
Joint venture (JV) with Speedy Hire
The commercial elements of the JV are covered within the
fuel cell and fuel processing value streams, particularly
following recent site visits.
CEO report.
This is further discussed in the notes to the accounts.
Whilst the plan to enter into the JV was announced during
the 2023 financial year, the contracts were not completed
Outlook
At the end of February 2024, the Company held £18.0m of
until after it.
cash balances. Of the £9.4m of outflow since the end of the
2023 financial year, nearly half related to capital purchases,
In terms of JV funding, initial investments became
inventory build-up of £2.6m and other working capital. The
unconditional on signing of the contract, with future cash
average monthly cash outflow from operations therefore
injections conditional on certain pre-agreed operational
remained consistent with Board expectations at £1.3m
milestones set out within the JV agreement.
per month.
Subsequent injections are to be funded in the form of
The 2024 financial year has started strongly with successful
commercial interest-bearing loan notes, issued in equal
factory acceptance testing of the first 30kW H-Power
share by each of the partners. Payment is expected to be
Generator in March and the growing pipeline of orders
made from the existing cash resources of each company,
driven by the JV with Speedy Hire.
with the option to seek external debt at a suitable point in
the future.
To maintain exclusivity in the UK and Ireland, a minimum
Chief Finance Officer
order of H-Power Generators has been agreed between
25 March 2024
Peter Dixon-Clarke
the partners. This quantity increases annually and is phased
over three years, being the minimum term of the exclusivity
agreement.
14
DISPLACING DIESEL
STRATEGICREVIEW Annual Report 2023
KEY PERFORMANCE INDICATORS
Commercial (£000s)
Revenue
Deferred revenue
Financial (£000s)
Operating loss
Year ended
31 October 2023
Year ended
31 October 2022
277
582
1,423
1,600
20,020
19,612
Liquidity (Unrestricted cash and cash equivalents)
27,366
40,220
Cash absorbed by operating and investing activities
14,381
15,352
Scale up (average headcount)
Support, operations and technical employees
113
77
Health and safety
On-site hours
Near miss
Lost Time Injuries (LTI)
205,982
152,453
9
NIL
10
NIL
DISPLACING DIESEL
15
STRATEGICREVIEW
MARKET OPPORTUNITY – FUEL CELL
Scaling-up delivery
AFC Energy PLC
2024 is all about delivery. Delivery of our
first H-Power Generators to our JV with
Speedy Hire, to ACCIONA and to TAMGO.
To achieve this, we are focussing on
securing our supply chain and scaling up
our manufacturing. We’ll do this through
a combination of strategic partnerships
within our supply chain and a modest
investment into on-site assembly.
16
DISPLACING DIESEL
STRATEGICREVIEW Annual Report 2023
DISPLACING DIESEL
17
STRATEGICREVIEW MARKET OPPORTUNITY
Fuel Processing
AFC Energy PLC
Ammonia has continued to gain
international importance as a hydrogen
carrier fuel with announcements during
2023 of billions of dollars of investment.
With a global hydrogen trade to be
facilitated through shipping ammonia at
scale, the ability to produce hydrogen at
the point of use, via ammonia cracking,
will be critical.
With the launch, in December 2023,
of the Company’s first, and the world’s
largest, modular scalable cracker here
in the UK, AFC Energy remains at the
forefront of this technology.
18
DISPLACING DIESEL
STRATEGICREVIEW Annual Report 2023
DISPLACING DIESEL
19
STRATEGICREVIEW MARKET OPPORTUNITY
Construction
AFC Energy PLC
The UK construction market is
aggressively moving towards the
displacement of diesel generators.
With high profile projects such
as HS2 stating that there will be
no diesel on site by 2029, the JV
with Speedy Hire PLC is perfectly
placed to step into this void with
its hydrogen powered generators.
Market enquiries, via SHS, are already
exceeding expectations and
current manufacturing capacity.
20
DISPLACING DIESEL
STRATEGICREVIEW Annual Report 2023
DISPLACING DIESEL
21
STRATEGICREVIEW R
E
V
E
W
I
S
T
R
A
T
E
G
C
I
MARKET OPPORTUNITY
Cracker Technology
Hydrogen, being the lightest and least dense fuel brings around
challenges in moving it long distances. Ammonia is a compound that
contains 75% hydrogen and can be liquified, meaning that it is easier
to trade around the globe as it is moved as a liquified gas.
The AFC Energy Cracker Technology is designed to
Green Hydrogen made in countries with copious and
capitalise on this growing trade by converting the ammonia
large-scale low-cost renewable energy can be readily
back into hydrogen at a high level of purity suitable for a
transformed into green ammonia. Over the next few
wide range of applications.
years, the number of green hydrogen plants coming on
stream will increase with the bulk of them using ammonia
as their method of moving the hydrogen to their ultimate
global destinations.
HYDROGEN - H2
AMMONIA - NH3
~ Hydrogen is a great clean fuel, but it is difficult and expensive to move in
~ Ammonia is a widely traded commodity chemical, used in multiple
any significant volume
industries (but predominantly fertilizer)
~ Conventionally moved in either pipelines or specially converted trailers
~ Transported widely as a liquid using standard tanks
~ Can be utilised as a ‘Hydrogen-Carrier’ with Ammonia Cracking
Technology
Hydrogen Made here
Cheap / Plentiful renewables
Hydrogen Converted
to Ammonia
Hydrogen Needed in Europe
~ High Energy Costs
~ Unreliable Renewables
AFC’s Ammonia Cracker
Hydrogen Made here
Cheap / Plentiful renewables
‘Energy’ transported in
bulk as Liquid Ammonia
Hydrogen Converted
to Ammonia
22
DISPLACING DIESEL
AFC Energy PLC R
E
V
E
W
I
S
T
R
A
T
E
G
C
I
Deployable Purified
Hydrogen Generation for
Transport & Power
Pilot Fuel generation for
Large Combustion Engines
(> MW Class)
Core Ammonia
Cracker
Technology
Hydrogen Rich Combustible
Fuel Gas for Industrial
Applications
At the heart of the AFC Energy ammonia cracker will
The future applications of the Cracker technology are
be our modular reactor. This compact reactor not only
almost limitless, however we are prioritising looking
catalytically cracks the ammonia, but also thermally
at both combustion and pure hydrogen generation
processes the gas streams, recovering heat where
applications as these appear to be the likely early
appropriate to improve and boost the efficiency. The
adopter routes to transition away from fossil fuels into
philosophy behind the AFC Energy modular reactor is
ammonia based fuels.
that multiple units can be combined to increase the
gas throughput.
During the 2023 financial year we launched our pilot
R&D site where we can demonstrate our prototype
systems at a scale equivalent of a 1MW electrolyser
(400kg/day Hydrogen output). The intention is to
prove out the operations, economics and useability
on this site whilst we look to off-take the hydrogen for
our fuel-cell and wider applications. At a suitable time,
we will substitute the existing cracker for our own
Bulk Liquid
Ammonia
Cracker
Hydrogen
Purification
Hydrogen
modular cracker.
TRANSPORT – RAIL
TRANSPORT – ROAD
DISPLACING DIESEL
23
Annual Report 2023 JOINT VENTURES
AFC Energy and Speedy plc Joint Venture (JV)
signed on 14 November 2023.
UK and Ireland
JV to provide dedicated
hydrogen H-Powered Generator
plant hire business servicing the
UK and Irish construction and
temporary power markets.
50:50
JV incorporated on a 50:50
basis and called Speedy
Hydrogen Solutions (SHS).
4
Four directors appointed to the
board of JV, two from Speedy
and two from AFC Energy.
£1.25m
Initial cash injection to JV,
as equity, of £1.25m
(£0.625m each).
3 years
Mutual exclusivity, subject to
minimum order quantity by the
JV over first three years, with
option to extend.
£2.0m > c.£4.7m
JV commitment to an initial
order of £2.0m for delivery of
generators with the contractual
ability to increase orders up
to c.£4.7m in the first year, by
mutual consent.
Phased
Subsequent H-Power Generator
sales orders and deliveries to be
on a phased basis.
SMA
AFC Energy to procure and
sell hydrogen fuel and provide
technical and operational
support under a Supply and
Maintenance Agreement
(“SMA”).
Speedy
Speedy to provide marketing,
accounting and logistical
support.
Pipeline
Strong customer interest
already being generated,
with growing pipeline.
24
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC SECTION 172
Companies Act 2006, Section 172(1) Directors’ statement –
promoting the success of the Company.
The Directors are fully aware of and understand their
statutory duty under the Act. A Director of a company must
act in the way he or she considers, in good faith, would be
most likely to promote the success of the Company for
the benefit of its members and, in doing so, have regard
(amongst other matters) to the following factors:
The likely consequences of any decision on the long-
term value of the Company through the annual strategic
review and risk appraisal processes which are reviewed
and approved by the Board;
The interests of the Company’s employees through
monitoring employee welfare and safety, annual
appraisal and setting a clear remuneration policy. The
Directors recognise that employees are fundamental
to the future growth and success of any company.
Such success depends on looking after our employees,
as described further in the ESG and Remuneration
Committee reports. The Board is mindful that decisions
and oversight often have to balance the differing
needs of stakeholders, and ensures this is taken into
consideration when making critical decisions;
The need to foster the Company’s business relationships
with suppliers, customers and others through the
development of strategic agreements with supply chain
and distribution channel partners;
The impact of the Company’s operations on the
community and the environment, monitored by the
ESG Committee which agrees on activities, sets goals,
monitors KPIs and reviews and updates policies and
procedures. An evaluation of our impact is assessed in
the ESG Committee report;
The desirability of the Company maintaining a reputation
for high standards of business conduct by reviewing and
updating the Company’s policies and setting out the high
standards and behaviours expected from those that
work for us or with us; and
The need to act fairly between members of the Company.
After weighing up all relevant factors, the Directors
consider which course of action best promotes the long-
term success of the Company, taking into consideration
the impact on stakeholders. In doing so, the Directors act
fairly as between the Company’s members.
The Board is ultimately responsible for the direction,
management, performance and long-term sustainable
success of the Company. It sets the Company’s strategy
and objectives, considering the interests of all its
stakeholders. A good understanding of the Company’s
stakeholders enables the Board to factor the potential
impact of strategic decisions on each stakeholder into
boardroom discussions. By considering the Company’s
purpose, vision and values together with its strategic
priorities the Board aims to make sure that its decisions
are fair. The Board has always, both collectively and
individually, taken decisions for the long term that align with
our strategic direction and consistently aims to uphold the
highest standards of business conduct. Board resolutions
are always determined with reference to the interests of
the Company’s employees, its business relationships with
suppliers and customers, and the impact of its operations
on communities and the environment.
Stakeholder input to our decision making during the period
has included:
Consultation with, and site visits by, shareholders,
market professionals and professional advisers to
diversify and strengthen the professional experience
and independence of the Board and senior managers
to cover commercial, product development, technology
and finance. The Nomination Committee report sets out
further details of the processes followed;
Market sounding and site validation projects confirm
that end users are prepared to pay a premium to
reduce emissions. Furthermore, end users and strategic
partners have provided feedback identifying potential
improvement to future versions of the Company’s
products; and
The ESG Committee report includes an evaluation of
existing programmes and day-to-day operational activity
which already align with our high level commitments
set out in the report to the environment, wider society
and governance treating all stakeholders fairly whilst
maintaining high standards of business conduct in
accordance with internal policies and procedures.
This statement serves as an overview of how the Directors
have performed this duty in the financial period and
engaged with the Company’s key stakeholders to help to
inform the Board’s decision-making. Further details of the
consultation processes applied during this period are set out
in the Nomination Committee, Remuneration Committee
and Strategic reports.
These initiatives should be read in conjunction with the
Corporate Governance section which sets out the decision
making and risk appraisal processes together with
delegation of authorities.
DISPLACING DIESEL
25
STRATEGICREVIEWAnnual Report 2023 RISK MANAGEMENT
The Company’s business exposes it to a broad range of risks. Its approach to managing these risks has therefore been to
create a system of internal controls, which looks to manage, rather than eliminate, risk. Whilst the Company has an Audit &
Risk Committee, responsibility for risk management lies with the entire Board.
The Board has adopted a policy of reviewing and updating the table below on a quarterly basis.
Commercial risk
Detail
Likelihood
Impact Trend Mitigation
Products are at an early stage of
commercialisation, and so may
not initially perform to customer
expectations and may take time
to gain traction in target markets.
The fuel cell offering comes in two
platforms, being air cooled and liquid
cooled.
Of these, only the former is generating
revenue at this stage.
High
High
Most development and
commercialisation workstreams
are undertaken in conjunction
with, and are reliant upon,
strategic partners.
Several strategic partnerships,
including two with plant hire
companies, are already in place
and discussions around additional
partnerships, beyond existing
exclusivity restrictions, are ongoing.
High
High
High system costs may reduce
competitiveness compared to
other fuel cell systems.
The Company does not yet
manufacture at the scale required
to generate material cost savings
from operational and purchasing
efficiencies.
High
High
Competitiveness, compared
to non-hydrogen solutions,
depends on the delivered price of
hydrogen.
Customers’, particularly plant hire
companies, buying decisions are
expected to be driven by the total
cost of ownership, being both upfront
capital expenditure and ongoing
operational expenditure.
High
High
Strict quality control procedures during
manufacturing and acceptance tests
prior to shipping combined with readily
available on-site support.
Working with strategic partners, such
as plant hire companies, will help in
penetrating markets, particularly where
those partners already have a presence.
Suitable sparing policy such that spare
fuel cell modules are made and stored
as part of any production run.
Extensive and continued due diligence
to confirm financial, technical and
commercial competence and alignment
Pursuit of multiple partnerships, to
mitigate negative impact of any single
relationship.
Geographic exclusivity clauses,
within the plant hire and distribution
agreements.
A proactive value engineering process
with a clear product roadmap and bulk
component purchases supported by
manufacturing drop sizes.
Supply chain pricing tension and
resilience from using multiple suppliers,
where appropriate.
Increasing levels of global investment in
the hydrogen supply chain, particularly in
green hydrogen.
Pursuit of an integrated fuelling strategy
covering both direct hydrogen and
hydrogen from ammonia.
Recent high success rate when applying
for applicable government grants.
26
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC Technological risk
Detail
Likelihood
Impact Trend Mitigation
Ongoing development requires
ready access to test equipment
and facilities.
Increased activity in the hydrogen
space means that timely access to
suitable test equipment cannot be
guaranteed and so may lead to delays
in product development.
High
High
The Company has good relations
with existing suppliers, both in the
UK and Europe. It is also exploring an
opportunity to develop its own test
facility.
The growing levels of customers;
employee turnover and strategic
partnerships increase the risk of
“leakage” of intellectual property
and/ or “know how”.
H-Power Towers were first deployed
in August 2022 and the first H-Power
Generator was factory acceptance
tested in March 2024.
Average employee headcount grew
during the 2023 financial year from
84 to 120.
Medium
Medium
Using specialist advisers, internal
controls, and employee briefings to
capture; protect and exploit internally
generated IP.
Partner agreements contain non-
disclosure and IP protection provisions.
The Company does not sell into markets
where there is a high risk of “reverse
engineering”.
Operational risk
Detail
Likelihood
Impact Trend Mitigation
The Company manufactures
and deploys its own product
to customer sites and often
procures the fuel required by
those customers for power
generation.
Whilst many materials and sub-
assemblies are sourced externally,
the Company undertakes assembly
operations and also handles volatile
and/ or corrosive chemicals, such as
hydrogen and ammonia, both on and
off-site.
Medium
High
The Company has a dedicated health
& safety officer along with a dedicated
HSE management & tracking system.
The HSE system incorporates a wide
range of functionality, including
modules such as “Accident/ Incidents
Management”; “Permit to Work” and
“Risk Assessment”.
The supply chain is international
and certain components are sole
sourced.
Most key components, by value, are
sourced from within Europe and North
America.
Medium
High
Moving away from sole sourcing for the
majority of suppliers, to achieve greater
resilience and cost competitiveness.
Some components are sourced from
China, and shipped via the Red Sea,
where shipping is currently under
threat from missiles and drones
launched from Yemen.
The supply chain is unproven at
the scale envisaged.
Driving down costs will require material
production increases over the coming
years.
Medium
High
Global pandemics, such as
Covid 19.
Effective collaboration, both internally
and externally (particularly the ability
to attend customer sites) is critical to
the success of the business.
Medium
Medium
Good planning, along with a growing
order book and strong balance sheet
will help in developing stronger and
more equitable supplier relationships as
output grows.
The Company has a Business Continuity
Plan, which includes the requirement
for robust information technology
systems able to support remote working
if required.
DISPLACING DIESEL
27
STRATEGICREVIEWAnnual Report 2023 RISK MANAGEMENT
Corporate risk
Detail
Likelihood
Impact Trend Mitigation
Failure to meet shareholder
expectations.
Medium
High
Fundraisings in 2020 and 2021
increased expectations and poor
performance could deter new
investors from buying or existing
investors from holding.
Further, the improving macroeconomic
outlook may stall and deter capital
markets from further exposure.
The Company does not
purchase key person insurance.
Senior staff have highly specialised
skills which would be hard to replace
following an unplanned departure.
High
High
Competition attracting &
retaining skilled personnel.
In addition to the inflationary
environment, the sector is seeing
increasing demand for skilled
personnel.
High
High
Cyber risk.
The use of networked systems across
a growing organisation, along with
being a listed entity, increases the risk
of cyber- attacks, such as ransom
demands
Medium
High
The Company focuses on cash burn and
operates strict cost control measures
on a project-by-project basis. It also has
contingency plans in place to curtail
certain projects if necessary to slow the
rate of cash burn.
The Company has adequate cash
balances to meet its liabilities as they fall
due for at least the next 12-months.
The Company has a proactive
remuneration committee with access to
specialist advice and a mixture of shorter-
term incentives, such as cash bonuses, and
longer-term incentives, such as options, to
retain and motivate employees.
The Company has a proactive
remuneration committee with access to
specialist advice and a mixture of shorter-
term incentives, such as cash bonuses, and
longer-term incentives, such as options, to
retain and motivate employees.
The Company is accredited under the
“Cyber Essentials” programme, the
government-backed scheme created by
the National Cyber Security Centre.
Political risk
Detail
Likelihood
Impact Trend Mitigation
Customers and strategic
partners in multiple jurisdictions.
The Company is UK based with
customers and strategic partners in
the UK; Europe and the Middle East.
Medium
High
Seeking specialist external advice,
particularly on tax and tariff related
matters.
State sponsored aggression
against other countries.
High
High
Invasions, such as those by Russia of
Ukraine and Hamas of Israel, have
global consequences, including
material increases to the cost of
energy, which drives consumer inflation
and places greater pressure on salary
inflation.
The Company has a proactive
remuneration committee with access to
specialist advice and a mixture of shorter-
term incentives, such as cash bonuses, and
longer-term incentives, such as options, to
retain and motivate employees.
Emissions targets and
government support can
impact customer purchasing
decisions.
The Company’s current customer
base is in the UK; Europe and Middle
East, all of which are jurisdictions where
considerable support, both legislative
and financial, will be required for the
continued energy transition.
Medium
Medium
Prioritise customers that already
have the budget to proceed with their
projects, rather than those still subject to
government funding.
Financial risk
Detail
Likelihood
Impact Trend Mitigation
The Company does not yet
generate positive cash flow.
The Company is at an early stage of
commercialisation and so does not
generate the gross margins required
to support its costs. It will therefore
require additional funding to scale-up
at the rate envisaged.
High
High
Continued sales growth and product
development will drive down
manufacturing costs per unit and improve
product margin.
Having a multi jurisdiction supply
Whilst sales revenue is mainly
High
High
chain exposes the Company to
£ denominated, the majority of
foreign exchange risk.
inventory costs are in US$ or €.
The Company holds accounts in all three of
the main currencies it trades in. Production
planning allows it to hedge when suitable.
The Strategic Report on pages 1 to 28 has been approved by the Directors and signed on their behalf by:
Peter Dixon-Clarke
25 March 2024
28
DISPLACING DIESEL
STRATEGICREVIEWAFC Energy PLC ESG COMMITTEE REPORT
Making good progress
Displacing Diesel is a route to flexible, clean energy we’re passionate
about along with our customers and investors.
We are proud and active players in the energy transition.
Recognising the challenges around hydrogen production,
as highlighted by the Hydrogen Council, we have expanded
our strategy and activities to include the development of
proprietary ammonia cracking technology to produce
green hydrogen out of green ammonia.
Our S Series and S+ Series fuel cells and carrier fuel
conversion products are a key alternative to diesel
generators, often in grid constrained locations. Enabling
the required shift away from diesel to hydrogen has huge
potential to reduce greenhouse gas emissions, air pollution
and noise pollution.
ESG is an essential and integrated part of our business,
and it is what our customers, investors, suppliers,
communities, and employees expect. Over the last year
we have made good progress around employee wellbeing
and training, governance, and health and safety and
environmental programmes.
Monika Biddulph
ESG board sponsor and Non-Executive Director
25 March 2024
“ Sustainability proudly sits at the heart
of our business and products. Over the
last year we have made good progress
in several key areas, with the materiality
matrix guiding the ESG Committee in the
prioritisation of activities”
DISPLACING DIESEL
29
Annual Report 2023ESGREPORT
ESG GOVERNANCE AND STRATEGY
Governance and strategic focus
Our approach
The ESG Committee is led by Monika Biddulph, board
ESG materiality assessment
As the company grows and implements manufacturing
sponsor and chair, with committee members including
scaleup, materials sourcing and supply chain management
employee volunteers as well as specialist functions
as well as the implementation of processes across the
such as Health and Safety, Human Resources, Finance,
company become increasingly important, and are a focus of
Procurement, and Facilities. The Committee regularly
the 2024 financial year. Also during the 2024 financial year, a
reports to the board on its activities and makes
refresh of the materiality matrix will be conducted, ensuring
recommendations to the board on ESG strategy.
we concentrate our efforts on those issues that are most
relevant and material for the business and our stakeholders.
Further details on Governance are in the Governance
section, with details on Product Benefits and ESG link to
strategy in the CEO and chair section of the report.
ESG materiality matrix
l
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
t
r
o
p
m
g
n
i
s
i
R
i
Carbon
footprint
Developing
clean energy
solutions
Legal and
regulatory
compliance
Product
benefits and
customer service
Health
and
safety
Supply chain
and materials
sourcing
Business
ethics
Product
end-of-life
management
Waste
and waste
management
Employee
engagement
Employee
development
and wellbeing
Board composition
and responsibilities
Educational
and industrial
partnerships
Charity and
community
engagement
Diversity,
equity
and inclusion
Regulation,
policy and
engagement
Rising importance to AFC Energy
Environmental issues
Social issues
Governance issues
Product benefit issues
The materiality matrix identifies key areas of focus for AFC Energy and its stakeholders, and helps set priorities on
actions. The materiality matrix will be refreshed during the 2024 financial year to ensure that we concentrate our
resources on the issues that are most material for the Company and its stakeholders.
30
30
DISPLACING DIESEL
DISPLACING DIESEL
AFC Energy PLCESGREPORT
ESG GOVERNANCE AND STRATEGY
Health and Safety
Health and Safety is at the foundation of our culture. We seek to provide and maintain a safe and healthy work
environment for our employees, contractors and other people involved in our operations.
Our existing Health & Safety Policy demonstrates our commitment to the prevention of injury and ill health in accordance
with the Health & Safety at Work Act (1974) and its associated regulations.
In June 2023, we introduced new HSE software, including modules on Incident, Action, Risk Assessment, Audit, Permit to
Work and Advanced Root Cause Analysis. This system enables easy reporting of safety observations and tracking of
actions combined with practical feasibilities for analysis, trends and dashboards.
Health and safety
On-site hours
Near miss
Lost Time Injuries (LTI)
LTI per onsite hours
2023
2022
2021
205,982
152,453
78,505
9
NIL
NIL
10
NIL
2
1
NIL
0.000013
Training
We provide all employees with access to a range of online
training courses, including mandatory training modules
leadership team enhance the interaction and improve
communication between leaders and teams.
covering health and safety and other compliance areas
We are proud to announce the installation of Health, Safety,
such as anti-bribery, anti-corruption, data security, fire
and Environment General Information Boards in our main
awareness, and privacy policy. These are completed by all
offices. These boards serve as comprehensive hubs,
new starters during their on-boarding process, with regular
featuring crucial information such as our HSE Policies, KPIs
refresher training for all employees.
and results, minutes of H&S Committee meetings and daily
changing photo cards of our First Aiders and Fire Marshals.
In addition, face-to-face health & safety training is
provided in-house and through third party specialists.
To further enhance our emergency response capabilities,
These include Fire Marshal, First Aid, Ammonia Safety and
we have strategically placed Automated External
Gas Safety training. Emergency Response Teams also
Defibrillators (AEDs) adjacent to each board.
received additional training such as First Aid at Work. As
of November 2023, we were able to achieve the highest
To encourage a culture of proactive reporting and
number of both first aiders and fire marshals in the
continuous improvement, our HSE Podium proudly
organisation so far with more than 13% of total employees
displays the employees with the highest number of
being first aiders and more than 18% being fire marshals.
safety observations.
Communication
Improved format H&S Committee Meetings aid and
Over the 2024 financial year we will be working towards a
Health & Safety Management System (in accordance with
accelerate the decision-making process and action
ISO 45001: 2018) and will be implementing ISO 14001.
follow-up. Regular Safety Walks with members of the senior
DISPLACING DIESEL
31
Annual Report 2023ESGREPORT
ENVIRONMENTAL
Continuing progress
Our employee survey results over three years say we are a society
that believes climate change is an important issue in our life and at
AFC Energy we want to help the world to reduce carbon emissions.
Employee Engagement &
Total Emissions
In our annual carbon footprint surveys, we asked our
We are proud to report that more than 80% of our
employees believe that climate change is real and
that humans have had a significant contribution to
employees about their transportation methods, fuel types,
it. Additionally, over 60% of our employees think that
the impact of working from home, and their views on
climate change is an important issue in their lives. This
climate change and the UN sustainability goals.
shows that our employees are committed to reducing our
environmental impact.
EMPLOYEE OPINION
We asked employees how much they agree or disagree with these standard questions (shown below),
with the following options available for them to score their response by:
1 - Strongly Disagree, 2 - Disagree, 3 - Neutral, 4 - Agree, 5 - Strongly Agree
5
4
3
2
1
0
2021
2022
2023
32
5
4
3
Climate change is an important
issue in my life
I am confident in quantifying carbon
emissions resulting from my lifestyle
choices and actions
I believe humans have had an
appreciable contribution to
climate change
I believe our climate is changing
It is important for me to be working
for an organisation that takes
responsibility for its actions relating
to climate change
DISPLACING DIESEL
AFC Energy PLCESGREPORT ENVIRONMENTAL
We have now completed carbon footprint measurements
for FY 2021 through to FY 2023.
Operational Emissions
We remain committed to contributing towards a greener,
more sustainable future, and we believe that our efforts
As expected in a fast-growing company that is scaling up
will make a positive difference in the fight against
manufacturing, we have increased our total scope 3 carbon
climate change.
footprint but were able to keep our scope 1 carbon footprint
low, and reduce our carbon footprint per employee in all
Most of our operational emissions - more than 80% of
categories. As we are using wholly green electricity for
the total operational footprint are coming from employee
heating and power, there are no scope 2 carbon emissions.
commutes and international travel. The introduction of
We expect that, as manufacturing scales up, our total scope
commute, resulting in a positive impact in reducing our
3 carbon footprint will increase and we will therefore focus
emissions per employee.
flexible working helped our employees to reduce their
on our supply chain, sustainable sourcing, and scope
three emissions.
)
e
2
O
C
t
(
t
n
i
r
p
t
o
o
F
n
o
b
r
a
C
)
e
2
O
C
t
(
t
n
i
r
p
t
o
o
F
n
o
b
r
a
C
3000
2500
2000
1500
1000
500
0
60
50
40
30
20
10
0
TOTAL EMISSIONS PER SCOPE PER YEAR
2,375
2,267
2,382
2,278
1,564
1,571
6.94
6.96
10.49
0
0
0
Scope 1
Scope 2
Scope 3
Total
2021
2022
2023
TOTAL EMISSIONS PER SCOPE PER EMPLOYEE PER YEAR
48.89
49.10
37.10
37.21
20.80
20.90
0.22
0.11
0.10
0
0
0
Scope 1
Scope 2
Scope 3
Total
2021
2022
2023
*scope 1 of 2021 has been restated due to better data granularity
DISPLACING DIESEL
33
Annual Report 2023ESGREPORT
SOCIAL
Empowering people
Our people are fundamental to creating value for the business. We
made good progress implementing our HR strategy this year, to
engage, strengthen, grow and retain our people and teams whilst
embracing diversity and inclusion and empowering people to be
their authentic selves.
Developing our people
To implement our people strategy, we introduced HiBob, an HR
To further allow personal development our iHasco on-line
training platform was expanded to give all employees access
information system. This now enables employees to update
to all iHasco courses, including soft skills training, leadership and
their own details, book leave and engage with others across
technical training, in addition to its use for mandatory training.
the entire business.
During the 2023 financial year the Company’s headcount
Employee reward and recognition
We completed both a mid-year and an end of year external
continued to grow by 18% and is expected to grow further in
salary benchmarking review to ensure that we are staying
FY24. We now have the ability to automate our onboarding
competitive not only for our new starters but for our
process, store, and access our people data easily and
existing teams too. We also introduced core competencies
accurately, which provides us with easy access to the data that
and salary bandings to enable our managers to have
is essential for our growth strategy.
meaningful development discussions with their teams.
Going forward, we will utilise HiBoB for objectives setting,
Our benefits were reviewed and a second successful save
personal development, policy and compliance and use the
as your earn share save scheme was launched.
data it provides to achieve strong business outcomes.
We also held two employee recognition events in 2023, our
Summer BBQ and Christmas lunch. Colleagues were voted
for by their peers and were recognised for demonstrating
our corporate values.
GENDER
YEARS OF SERVICE
EMPLOYEE AGE
17+
• Female • Male
A 36+
• 0-1 • 1-2 • 2-5
• 5-10 • 10-15 • >15
A 26+
• 20-29 • 30-39 • 40-49
• 50-59 • 60+
34
DISPLACING DIESEL
AFC Energy PLCESGREPORT83
+
38
+
16
+
2
+
4
+
4
+
27
+
27
+
15
+
5
+
A
SOCIAL
To implement our people strategy, we
introduced HiBob, an HR information
system. This now enables employees
to update their own details, book
leave and engage with others
across the entire business.
DISPLACING DIESEL
35
Annual Report 2023ESGREPORT SOCIAL
Community Outreach
In the 2023 financial year we partnered with a local
As part of our diversity and inclusion initiatives, we have
established a multi-faith/multi-purpose room to recognise
secondary school, Glebelands. A team of five employees
those that may need a quieter room, and have introduced
from different parts of the business presented a careers
gender-neutral toilets.
talk to 120 GCSE students, providing insights to different
roles within STEM, and shared their personal career
Wellbeing has been a big focus for AFC Energy this year.
journeys. We have created a partnership programme with
We have introduced an employee assistance programme
a local science academy, and, in the 2024 financial year,
to offer employees easy access to advice, whether it be
we will be hosting five work experience students who excel
wellbeing, financial or legal.
within Science and providing them with a week of real work
life experiences.
Remote working and core hours were introduced in the
2023 financial year, allowing our colleagues to work from
A team of Engineers attended Tanbridge House School in
home and provide them with the flexibility to start and finish
Horsham to provide an interactive demonstration of how
at a time that suits their personal needs.
fuel cells work using small cars and various levels of salt
water, allowing the students to race the cars and document
the results.
We held a coffee morning in aid of the Royal Marsden
Cancer Charity, where all proceeds (£908) from the cake
sale went to the charity.
Employee Engagement, culture,
and values
We strive to provide an engaging and supportive
environment for our employees to work at their best. We
hold regular “town hall” and team meetings to update
on company progress and, of course, to celebrate our
successes. In addition we have this year introduced coffee
mornings with the CEO and CFO and opportunities to meet
the non-executive directors.
Our values
Responsibility
We take care of our people and our planet
Customer first
We’re driven by delivering great outcomes for our
customers
Innovation
We are pioneering disruptive solutions to decarbonise
the future
Accountability
We’re committed owners of structured plans and
outcomes
Collaboration
We diligently deliver by working together towards
shared goals
STAFF NATIONALITIES
Global Team – AFC Energy thrives
with talent from across of the world
36
DISPLACING DIESEL
AFC Energy PLCESGREPORT COMMITMENTS
Environmental
~ Development of zero-emission fuel
Social
~ Embedding effective health & safety
Governance
~ Strong Board oversight
cell generators at point of use
practices into everything we do
~ Supporting employees with their
embedded throughout the business
~ Effective decision-making
personal development
~ Clear diversity & inclusion practices
and employee wellbeing programs
~ Commitment to help the
communities we live in
~ Strong operational, financial and
procurement processes
~ Driving change through effective
KPIs
~ Ability of systems to use multiple
sources of fuel to accelerate
deployment to support
decarbonisation
~ Development of hydrogen
generation systems
~ Providing a path to carbon footprint
reduction
~ Completing ISO 14001 Environmental
certification
~ Implementing effective supply chain
and procurement management
DISPLACING DIESEL
DISPLACING DIESEL
37
37
Annual Report 2023ESGREPORT HOW WE SUPPORT THE UN SUSTAINABILITY GOALS
Air pollution remains a significant health
issue in many cities across the world,
particularly amongst the young or
vulnerable. The replacement of diesel
generators with hydrogen fuel cells such
as ours reduces air pollution.
Our fuel cell technologies produce
zero emissions at the point of use,
replacing their fossil fuel equivalent in
use today. With increased production
and availability of clean hydrogen and
its falling price (forecasted to halve in
We partner with industry to
support the decarbonisation of
hard-to-abate sectors such as
construction, maritime, rail and
data centres. For example our
strategic partnership with Speedy,
to provide H-Power Generators
to the construction industry, and
Tamgo, for distribution into Saudi
Arabian and near east industrial
and off-grid power markets.
The vision for a world without
price by 2030), we are playing our part in
hydrocarbons often puts hydrogen
delivering affordable, clean energy.
We employ a diverse workforce with
professional, technical, engineering,
scientific and other highly specialised
skills and experience. Our people join and
stay with us because of the opportunity
to work on innovation and sustainability.
centre stage. We are contributing
to the global efforts to get to both
net zero and real zero with our
hydrogen generation and hydrogen
fuel cell technologies.
38
38
DISPLACING DIESEL
DISPLACING DIESEL
AFC Energy PLCESGREPORT CORPORATE GOVERNANCE STATEMENT
I am pleased to introduce our corporate governance report for the
year ended 31 October 2023.
The Board and I take corporate governance very seriously
A General Counsel and Company Secretary was
and are committed to high standards of governance,
appointed, further enhancing the Company’s
ensuring Board procedures are robust, kept up to date and
governance structure and processes to support sound
appropriate for a Company of our size. The Board reviews
decision making. A revised Delegation of Authority
its procedures periodically to ensure that they evolve as the
process was introduced earlier in the financial year.
business grows.
As a publicly listed business we follow the Quoted
Companies Alliance Corporate Governance Code (the
QCA Code) and its principles in ensuring the business acts
fairly, professionally and with integrity in all its work. Details
Through the work of the Chairman and the Company
Secretary, we ensured that Directors have the
necessary and up-to-date experience, skills and
capabilities required to effectively discharge their
functions.
of how the QCA Code is applied can be found at
The Company continued to promote a zero-tolerance
https://www.afcenergy.com/investors/aim-rule-26/
approach to bribery and corruption and maintains best
corporate-governance.
practice policies for all personnel to comply with.
During the 2023 financial year:
The Company continued to deliver its strategy and
business model, promoting long-term value creation
for all our shareholders.
The Company continued to seek to understand and
meet shareholders needs and expectations, delivering
The Company provided regular and timely
communication to the market and shareholders on
how the Company is both governed and performs,
creating a “feedback loop” with our key stakeholders to
ensure continuous improvement.
our requirements under Section 172 of the Companies
Gary Bullard
Chair
25 March 2024
Act.
The Company, and its ESG Committee considered
wider stakeholder and social responsibilities and their
implications for long-term success, .
Risk management continued to be effectively
embedded throughout the business, overseen by the
Audit and Risk Committee.
The Board maintained a well-functioning, balanced
team that actively drives and supports the continued
success of the business.
DISPLACING DIESEL
39
Annual Report 2023GOVERNANCEREPORT DIRECTORS’ REPORT
The Directors present their report together with the
audited financial statements for the 2023 financial year.
The comparative period was from 1 November 2021 to
31 October 2022.
Principal activity and review of
future business developments
The principal activity of AFC Energy plc (the Company) is the
Significant shareholdings of greater
than 3.00% at 15 March 2024
Hargreaves Lansdown plc
Interactive Investor
Janus Henderson Investors
HSDL Stockbrokers
Barclays Smart Investor 41
development of fuel cells and fuel conversion.
DWP Bank
A review of future business developments is included within
the Chair’s, Chief Executive’s and Chief Financial Officer’s
reports on pages 6 to 14.
Results and dividends
The operating loss before tax for the year was £19.6m
(2022: £19.5m).
ING-DIBA Frankfurt
HSBC Trinkaus & Burkhardt
AJ Bell
Financial instruments
Financial instruments are disclosed in note 25 of the
financial statements.
%
13.96
11.46
6.93
6.01
4.42
3.90
3.50
3.22
3.19
56.59
No dividends were paid in the year. No dividend will be paid
in respect of the current year.
Board members
Details of the Board membership during the period are set
Liability insurance for company
officers
The Company maintains Directors’ and Officers’ liability
insurance cover for its directors and officers to the extent
out in the Nomination Report.
permitted under the Companies Act 2006.
On 31 October 2023 the beneficial interests of Directors
and their families in the equity share capital of the
Company were:
Gary Bullard
Adam Bond
Gerry Agnew
Number of Ordinary
shares of 0.1p
2023
Number of Ordinary
shares of 0.1p
2022
500,000
3,583,169
621,684
225,000
3,583,169
N/A
Research and development
The Company invests substantially in research and
development and makes claims under the Government’s
R&D tax credit scheme. In the year, relevant qualifying
expenditure was £8.5m (2022: £9.1m).
Risk management
The responsibility of the Board is to determine financial risks
and delegate to the finance function their management by
setting policies and objectives. The management of credit,
None of the other directors had a direct interest over share
liquidity and interest rate risks are set out in note 24 to the
capital during the reporting period.
financial statements.
Going concern
See disclosures within the CFO report and notes to
the accounts.
40
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT Events after the reporting period
Details of the following events since the financial year end
Auditor
A resolution to reappoint the Auditor of the Company,
are provided as follows:
Grant Thornton UK LLP, will be proposed at the forthcoming
launch of Speedy Hydrogen Solutions, a joint venture
expressed their willingness to continue as Auditor of
Annual General Meeting. Grant Thornton UK LLP have
with Speedy Hire plc, the near-term financial impact of
the Company.
which will be an investment by the Company into the JV of
£0.625m;
build and commission of modular ammonia to hydrogen
cracking plant, the near-term financial impact of which
will not be material;
Brendan Keane
Company Secretary
acquisition of certain UK mobile hydrogen storage and
25 March 2024
distribution assets from Octopus Hydrogen, the near-
term financial impact of which, along with some other
post year end capital purchases, will be less than £1.0m;
attestation of conformity of CE Mark, the near-term
financial impact of which will not be material; and
first factory acceptance test of 30kW generator, the
near-term financial impact of which will not be material.
None of the above are considered to be adjusting events.
Disclosure of information to
the auditor
The directors confirm that:
so far as each director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and
the directors have taken all the steps they ought to have
taken as directors in order to make themselves aware of
any relevant audit information and to establish that the
company’s auditor is aware of that information.
DISPLACING DIESEL
41
Annual Report 2023GOVERNANCEREPORT BOARD OF DIRECTORS
GARY BULLARD
Non-Executive Chairman
ADAM BOND
Chief Executive Officer
PETER DIXON-CLARKE
Chief Financial Officer
MONIKA BIDDULPH
GERRY AGNEW
DUNCAN NEALE
Non-Executive Director
Non-Executive Director
Non-Executive Director
Appointed to Board
2021
2014
2022
2021
2019
2023
Appointed to Board
Relevant skills
and experience
Experienced Chairman, Non-
Executive Director and executive
in industrial and information
technology industries.
Broad experience in the scale up
of high-volume manufacturing
and supporting high value,
high growth businesses in
the commercialisation of
technology.
Over 25 years’ experience
operating within the international
energy sector both in executive
management positions for
listed energy companies, and
in advisory capacities to both
governments and the private
sector.
Adam is well networked
internationally across
the conventional and
unconventional energy sectors
and has a strong understanding
of energy markets and deal
making within that sector.
Qualified with Bachelors’
degrees in Commerce and Law
and a Master in Laws (Taxation).
Previous appointments
Senior management positions in
IBM, BT and Logica.
Director of JS Yerostigaz
(Uzbekistan).
Non-Executive Director of
Chloride plc and Rotork plc.
Previously Non-Executive
Director of AFC Energy plc
2012 - 2014.
A Deloitte trained Chief
Financial Officer with over
35 years of experience, of
which 25 have been at senior
management or board level.
Over 20 years’ experience in
Over 20 years’ experience in fuel
Duncan Neale is a big 4 trained
commercial, operational and
cell technology and systems with
Chartered Accountant and
technical areas of international
both Rolls-Royce and LG Fuel Cell
experienced Non-Executive
Relevant skills
and experience
technology businesses. PhD
Systems Inc. Before joining the
Director and Audit Chair, with a
in Experimental High Energy
Board of AFC Energy, Dr Agnew
corporate finance, fundraising,
Physics from ETH Zurich.
served as Senior Fellow on the
audit and M&A background.
Rolls-Royce Council of Fellows,
attending the Company Chief
Technology Officer’s Technology
Strategy workshops.
Broad experience primarily
in the Energy sector, but also
in the Financial Services and
Charity sectors, and always
in high profile organisations
undergoing strategic
change.
Most roles have been UK
based, but usually with a
strong international element
and time spent overseas
in countries including: USA,
Norway, Kuwait, Ethiopia,
Falkland Islands and
Indonesia.
Member of Senior Leadership
Dr Agnew spent seven years as
Experience primarily in the
Previous appointments
Team IP Products at Arm
Chief Technology Officer and
Energy sector, but also in helping
Holdings plc. Non-Executive
Chief Technology Adviser to LG
to scale Technology companies.
Director Linaro Limited
Fuel Cell Systems Inc. Prior to
For over 25 years he has held
this he was Chief Technologist
numerous senior finance roles,
of Rolls-Royce Fuel Cell Systems,
including as Chief Financial
Executive VP Engineering at
Officer for listed and private
Rolls-Royce Fuel Cell Systems
companies.
and Chief Engineer Fuel Cell
Systems at Rolls-Royce.
Other current
appointments
Chairman: Gooch &
Housego plc
Non-Executive Director: Spirent
Communications plc.
Non-Executive Director of Ilika
plc, Celebrus plc and Power Roll
Limited.
Non-Executive Director and
Audit Chair of Atrato Onsite
Other current
appointments
Energy plc and Gresham House
Energy Storge Fund plc. Trustee
of Cambodian Children’s Fund UK
42
42
DISPLACING DIESEL
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT Previous appointments
Senior management positions in
Director of JS Yerostigaz
Broad experience primarily
Broad experience in the scale up
of high-volume manufacturing
and supporting high value,
high growth businesses in
in advisory capacities to both
governments and the private
sector.
the commercialisation of
Adam is well networked
technology.
internationally across
the conventional and
unconventional energy sectors
and has a strong understanding
of energy markets and deal
making within that sector.
Qualified with Bachelors’
degrees in Commerce and Law
and a Master in Laws (Taxation).
IBM, BT and Logica.
(Uzbekistan).
Non-Executive Director of
Previously Non-Executive
Chloride plc and Rotork plc.
Director of AFC Energy plc
2012 - 2014.
in the Energy sector, but also
in the Financial Services and
Charity sectors, and always
in high profile organisations
undergoing strategic
change.
Most roles have been UK
based, but usually with a
strong international element
and time spent overseas
in countries including: USA,
Norway, Kuwait, Ethiopia,
Falkland Islands and
Indonesia.
GARY BULLARD
ADAM BOND
PETER DIXON-CLARKE
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer
MONIKA BIDDULPH
Non-Executive Director
GERRY AGNEW
Non-Executive Director
DUNCAN NEALE
Non-Executive Director
Appointed to Board
2021
2014
2022
2021
2019
2023
Appointed to Board
Relevant skills
and experience
Experienced Chairman, Non-
Over 25 years’ experience
A Deloitte trained Chief
Executive Director and executive
operating within the international
Financial Officer with over
in industrial and information
energy sector both in executive
35 years of experience, of
technology industries.
management positions for
which 25 have been at senior
listed energy companies, and
management or board level.
Over 20 years’ experience in
commercial, operational and
technical areas of international
technology businesses. PhD
in Experimental High Energy
Physics from ETH Zurich.
Over 20 years’ experience in fuel
cell technology and systems with
both Rolls-Royce and LG Fuel Cell
Systems Inc. Before joining the
Board of AFC Energy, Dr Agnew
served as Senior Fellow on the
Rolls-Royce Council of Fellows,
attending the Company Chief
Technology Officer’s Technology
Strategy workshops.
Duncan Neale is a big 4 trained
Chartered Accountant and
experienced Non-Executive
Director and Audit Chair, with a
corporate finance, fundraising,
audit and M&A background.
Relevant skills
and experience
Member of Senior Leadership
Team IP Products at Arm
Holdings plc. Non-Executive
Director Linaro Limited
Dr Agnew spent seven years as
Chief Technology Officer and
Chief Technology Adviser to LG
Fuel Cell Systems Inc. Prior to
this he was Chief Technologist
of Rolls-Royce Fuel Cell Systems,
Executive VP Engineering at
Rolls-Royce Fuel Cell Systems
and Chief Engineer Fuel Cell
Systems at Rolls-Royce.
Experience primarily in the
Energy sector, but also in helping
to scale Technology companies.
For over 25 years he has held
numerous senior finance roles,
including as Chief Financial
Officer for listed and private
companies.
Previous appointments
Other current
appointments
Chairman: Gooch &
Housego plc
Non-Executive Director: Spirent
Communications plc.
Non-Executive Director of Ilika
plc, Celebrus plc and Power Roll
Limited.
Non-Executive Director and
Audit Chair of Atrato Onsite
Energy plc and Gresham House
Energy Storge Fund plc. Trustee
of Cambodian Children’s Fund UK
Other current
appointments
DISPLACING DIESEL
DISPLACING DIESEL
43
43
Annual Report 2023GOVERNANCEREPORT ROLES OF THE BOARD AND SUB-COMMITTEES
The Board is collectively responsible for the long-term success of the
Company and is ultimately responsible for its strategy, management,
direction, and performance.
The Board sets the strategic aims, ensures that the
Deployment of our technology with strategic partners and
necessary financial and human resources are in place
end users real life settings to gain feedback on the market
to meet financial and ESG objectives, reviews progress
readiness of our equipment.
towards the achievement of these objectives and reviews
the performance of management. The Board establishes
the values, culture, ethics and standards of the Company
Board responsibilities
The Board has overall responsibility for promoting the
and sets the framework for prudent and effective controls
success of the Company and balancing the interests of all
which enable risks to be assessed and managed. The
stakeholders. The Executive Directors have day-to-day
Company currently follows the QCA Code. The Board
responsibility for the operational management of the
has delegated authority to its committees to carry out
activities. The Non-Executive Directors are responsible
the tasks defined in the Committees’ terms of reference.
for bringing independent and objective judgement to
The Committees are the Audit and Risk Committee,
Board decisions.
the Remuneration Committee and the Nominations
Committee. The Board has delegated the day-to-day
There is a clear separation of the roles of Chief Executive
management of the Company to the Chief Executive
Officer and Non-Executive Chairman. The Chairman
Officer.
Stakeholder input to decision
making
Consultation with shareholders, market professionals and
is responsible for overseeing the running of the Board,
ensuring that no individual dominates the Board’s decision-
making and ensuring the Non-Executive Directors are
properly briefed on matters. The Chairman has overall
responsibility for corporate governance matters. The Chief
professional advisers to set an appropriate aggregate
Executive Officer has overall responsibility for implementing
cap on fees for non-executive directors to provide
the strategy of the Board and managing day-to-day
sufficient but not excessive flexibility over the next few
business activities. The Company Secretary is responsible
years to recruit and retain suitably experienced and
for ensuring that Board procedures are followed, and
qualified non- executive directors to support and work
applicable rules and regulations are complied with.
with the executive team.
The Company has a remuneration policy that can attract,
management of the Company and meets at least six times
retain and motivate senior executives and employees in
a year and all key operational and investment decisions are
The Board is responsible to the shareholders for the proper
line with shareholder objectives and going forward the
subject to Board approval.
remuneration report will be put to vote in the AGM.
The organisational structure is clearly documented
Consultation with shareholders, market professionals,
and communicated, identifying levels of responsibility,
customers and employees to identify their expectations
delegated authority and reporting procedures. The Board
and priorities in regard to ESG reporting. External advisers
supports the highest levels of commitment and integrity
have been used to measure our carbon footprint and
from employees. Expected standards of behaviour are set
create a materiality matrix to prioritise actions and the use
out in the Employee Handbook, a copy of which is available
of resources. The results of these reports are described in
to all employees. The Company is an equal opportunities
more detail in the ESG report.
employer, and its policy is to ensure that all job applicants
and employees are treated fairly and on merit, regardless
of their race, gender, marital status, age, disability, religious
belief or sexual orientation.
44
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT ROLES OF THE BOARD AND SUB-COMMITTEES
The Board considers effective communication with
Such systems are designed to manage, rather than
shareholders to be especially important and encourages
eliminate, the risk of failure to achieve business objectives
regular dialogue with investors. Shareholders will be given at
as any system can only provide reasonable, and not
least 21 days’ notice of the Annual General Meeting, at which
absolute, assurance against material misstatement or loss.
they will have the opportunity to discuss the Company’s
The process in place for reviewing AFC Energy’s system of
development and performance. The Company’s website
internal controls includes procedures designed to identify
www.afcenergy.com contains full details of the Company’s
and evaluate failings and weaknesses, and to ensure that
activities, press releases, Regulatory News Service
necessary action is taken to remedy the failings.
announcements, share price details and other information.
The Board has considered its policies regarding internal
The Directors have overall responsibility for ensuring that
controls, as set out in the QCA Code, and undertakes
the Company maintains a system of internal controls to
assessments of the major areas of the business and
provide them with reasonable assurance that the assets
methods used to monitor and control them. The review
of the Company are safeguarded, and that shareholders’
covers commercial, technological, operational, corporate
investments are protected. The system includes internal
and political risks. The risk review is an ongoing process with
controls appropriate for the Company.
reviews being undertaken on a quarterly basis.
The table below shows the number of Board and Committee meetings of the Company held during the financial year,
and the attendance of members.
Board
meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
Gary Bullard
Monika Biddulph
Gerry Agnew
Adam Bond
Peter Dixon-Clarke (Appointed 1 December 2022)
Duncan Neale (Appointed 1 August 2023)
Joe Mangion (resigned 31 July 2023)
Jim Gibson (resigned 9 June 2023)
Graeme Lewis (resigned 30 November 2022)
*Attended as an invitee, not a member of the Committee
7
7
7
7
6
1
6
4
1
3*
3
3
4*
4*
—
4
—
1*
2*
2
2
1*
—
—
2
—
—
DISPLACING DIESEL
2
2
2
—
—
—
—
—
—
45
Annual Report 2023GOVERNANCEREPORT
AUDIT AND RISK COMMITTEE REPORT
The Audit and Risk Committee (the Committee) plays
Duncan Neale has significant senior financial experience,
a central role in the review of the Company’s financial
which is further detailed in his biography. The wider
reporting, risk review and internal control processes.
Committee is considered to have sufficient, recent and
relevant financial experience and competence to discharge
The Committee’s role is to assist the Board in its financial
its responsibilities.
oversight of the Company and ensuring its effective
financial integrity through the regular review of its financial
The Technical Advisory Board, comprising Gerry Agnew,
processes and performance, and by remaining up to
who is also a member of the Committee, supported by
date with the latest regulatory changes and evolution
external technical advisers from academia and industry,
of best practice.
works alongside the Committee to ensure that the
Company has appropriate technical risk management
The Committee’s main responsibilities include:
and processes.
Satisfying itself as to the integrity of the financial
Committee meetings are usually attended, as invitees, by
statements and other formal announcements relating
the External Auditor, the Board Chair, the Chief Executive
to financial performance and ensuring compliance with
Officer and Chief Financial Officer. The Committee also
applicable accounting standards, regulations and rules;
meets with the External Auditor without the Executive
Supporting the Board, which retains responsibility, in
monitoring and reviewing the effectiveness of internal
financial controls and risk management policies and
systems;
Monitoring and reviewing the going concern status of the
Company;
Satisfying itself of the independence and effectiveness
of the external auditor, and making recommendations
to the Board in relation to the appointment and
remuneration of the external auditor, and the policy
relating to their non-audit services; and
Considering the need for an internal audit function.
Directors being present.
Assessing that the risk and control
framework and processes are
operating accurately
The Company prepares a Board approved budget, which
includes a cash flow projection. Actual performance
is compared during the year to the budget to identify
variances and take action if required.
The Board is risk averse when investing the Company’s
cash. The Company’s policy is to deposit funds with leading
regulated financial institutions based in the UK.
The Committee considers certain key areas of risk
management and supports the Board in overseeing
a company-wide approach to risk management. The
Significant financial reporting
matters
During the period, the Committee received and considered
Committee met four times during the period.
reports from the Chief Financial Officer in respect of
The Committee is composed of non-executive directors
subsequently approved the disclosure set out in the
the critical accounting estimates and judgements and
and was chaired by Joe Mangion until his resignation on 31
financial statements.
July 2023 and replacement by Duncan Neale from 1 August
2023. Duncan is supported by Gerry Agnew and Monika
The Committee considered the following significant
Biddulph, who were both members for the whole year.
financial reporting matters, estimates and judgements,
amongst others, when approving the financial statements
for the 2023 financial year.
46
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT AUDIT AND RISK COMMITTEE REPORT
Onerous contracts
Throughout the year, the performance of each open
contract is reviewed and the expected unavoidable cost
Risk management and internal
controls
The Committee has monitored the risk management
of delivering that contract is compared to the expected
processes and recommended that the Company’s risk
revenue from doing so. Where the expected costs suggest
management matrix be reviewed, at least quarterly, by
a gross loss, the contract is treated as an onerous contract
the Board.
and a provision is recognised immediately through the
profit and loss.
The Committee has confirmed that the inventory
management improvements being implemented will be
The Committee agreed that no such provisions needed to
required to support the scaling up of the business.
be made in the year.
The Committee has not seen it as necessary to appoint an
Valuation and disclosure of share-based payments
internal auditor.
Share based payments are accounted for in accordance
with IFRS 2 and specific consideration has been given to:
Duncan Neale
Audit and Risk Committee Chair
25 March 2024
Application of a Black Scholes valuation model for
options where the performance criteria are not market-
based and application of a Monte Carlo valuation model
for options where the performance criteria are market-
based.
Reviewing the assumptions, especially for share price
volatility, used in the valuation models.
Independent professional advisers have been employed to
provide the valuations and discuss the best treatment
to adopt.
The Committee agreed with the valuation and accounting
treatment adopted.
Going concern
See discussion of this within the CFO report and notes to
the accounts.
DISPLACING DIESEL
47
Annual Report 2023GOVERNANCEREPORT NOMINATION COMMITTEE REPORT
The Nomination Committee ensures that the Board possesses
All the other directors have been re-elected at either of the
an appropriate balance of skills, knowledge, experience,
prior two AGMs.
diversity and independence amongst the Directors. To assist
in identifying and nominating candidates for the Board, the
The Board considers itself to be sufficiently independent and
Committee oversees succession planning for the Executive
adheres to the QCA Code recommendation that a board
and Non-Executive Directors and Senior Management.
should have at least two independent Non-Executive Directors.
The Nomination Committee also has responsibility for the
The Committee determines a Non-Executive Director’s
oversight of talent development throughout the Company.
independence by evaluating their character and judgement, in
The Nomination Committee also has the responsibility
line with the QCA Code.
for ensuring there is appropriate diversity in the Company
especially at senior management and Board level.
Although the recent Board changes have further improved
The Directors who served during the year and during the
continues to grow it will be important to make further progress
period up until the signing of these financial statements were:
on our gender balance at all levels in the company. Although
the percentage gender balance on the Board as the company
Directors
we ensured we had a diverse short list in the process for the
appointment of the new Audit Chair role, we ultimately selected
Gary Bullard:
Non-Executive Chairman
a male candidate. We are looking for an opportunity to appoint
Adam Bond:
Chief Executive Officer
an additional female director to the Main Board, either through
Graeme Lewis:
Chief Financial Officer
natural rotation or by adding an additional director.
(resigned 30 November 2022)
Jim Gibson:
Chief Operating Officer
Upon the retirement of Joe Mangion who had served as
(resigned 9 June 2023)
Audit Chair and Senior independent Director the Committee
Peter Dixon-Clarke:
Chief Financial Officer
(appointed 1 December 2022)
instigated an external search for a suitable replacement. After
considering a diverse slate of suitably qualified candidates the
Gerry Agnew:
Non-Executive
Monika Biddulph:
Non-Executive
Joe Mangion:
Non-Executive
Duncan Neale:
(resigned 31 July 2023)
Non-Executive
(appointed 1 August 2023)
In accordance with the Company’s Articles of Association,
a director appointed during or after the year must stand for
re-appointment at the first Annual General Meeting after
such appointment. Further, any Director who was not elected
or re-elected at either of the two preceding Annual General
Meetings must stand for re-appointment at the Annual
General Meeting. Duncan Neale was appointed subsequent to
the most recent Annual General Meeting and therefore offers
himself for election.
The Committee reviewed the balance of skills, experience
and independence of the Board. For Non-Executive Directors,
independence in thought and judgement is vital to facilitating
constructive and challenging debate in the boardroom and
is essential to the operational effectiveness of the Board. The
appraisal system seeks to identify areas of concern and make
recommendations for any training or development to enable
the Board member to meet their objectives which will be set
for the following year. The appraisal process will also review
the progress made against prior year targets to ensure any
identified skill gaps are addressed.
Committee unanimously recommended the appointment
of Duncan Neale as his replacement, who brings extensive
finance and Audit Chair experience from a range of sectors
including energy.
Directors’ service contracts or appointment letters and the
terms of reference of the sub-committees of the Board make
provision for a director to seek personal advice independently
in furtherance of his or her duties and responsibilities.
To support effective future succession and appointments, the
Committee will continue to engage with external stakeholders
(including shareholders and regulators) when appropriate.
During the course of the year the Committee also spent
time reviewing the succession plans for executive and senior
management and in reviewing what actions could be taken to
increase diversity at all levels in the Company.
The Committee believes that the Company has a well-
balanced Board whose skills, experience and independence
covering research, product development, commercial
and finance are aligned to the current business and
stakeholder needs.
Gary Bullard
Nomination Committee Chair
25 March 2024
48
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT
REMUNERATION COMMITTEE REPORT
On behalf of the Board, I am pleased to present the
2023 Directors’ Remuneration Report, which sets out the
remuneration paid to the Directors in the 2023 financial year
and the implementation of our remuneration policy for the
2024 financial year.
AFC Energy is listed on the Alternative Investment Market
(AIM) and therefore provides these remuneration disclosures
on a voluntary basis. As such, the charts and tables included
here are unaudited, but, in general, our disclosures have been
prepared in accordance with best practice.
We draw attention to the following decisions of the
Committee as part of our efforts to respond to shareholder
feedback and continuously improve governance:
Holding an advisory shareholder vote on the
remuneration report on a voluntary basis;
Creating and maintaining a Remuneration Committee
which is made up entirely of independent Non-Executive
Directors with relevant experience, and that complies
with the QCA Code;
Operating an LTIP scheme for Executive Directors and
senior leaders in the business;
Maintaining an equal pension policy for our entire
workforce, including Executive Directors;
Keeping a consistent philosophy of reward throughout
the business, which for the C-suite is strongly linked to
performance and transparency; and
Consulting and maintaining an open dialogue
with shareholders and advisory bodies on all key
remuneration decisions.
We transitioned to new structures in 2022 following a
fundamental review and feedback from investors. Although
this has worked well, the committee are currently reviewing
this to ensure it continues to attract and retain high quality
individuals against a climate of evolving market conditions.
Following this review any changes will be disclosed in next
year’s remuneration report.
Incentive outcomes during the year
Annual Bonus
For the year under review, stretching annual bonus targets
had been set to continue the Company’s drive toward
achieving sustained revenue and subsequent profitability
and objectives were structured so that maximum payout
could only be achieved for exceptional performance.
Bonuses for the year were based on a blend of 40%
financial, 50% operational and 10% ESG objectives. For
the financial objectives an overall payout of 26.0% was
determined reflecting a threshold performance for sales
revenue and a stretch performance for overall spend.
There was no payout in regard to an order book objective
that was not met. All assessments were made in line with
the Remuneration Policy described in detail below and first
rolled out in the previous year’s Annual Report.
For the operational objectives, 37.5% of a maximum 50%
bonus pool was paid out. In achieving this determination,
the Committee noted excellent performance in cost
per kW reduction and improved resilience of fuel cell
generator units. At the same time differentiating capability
had been demonstrated in modular ammonia cracker
implementation and novel cracker product cleanup,
extending this to fuel cell standard. Mission critical areas
such as health and safety and progress toward CE
certification for fuel cell generators were also delivered to
full requirement.
The Company continues to operate an ESG objective
grouping and the Committee assessed performance
in this area to warrant the full 10% payout. Overall, the
bonus earned across all objective areas came to 73.5% of
maximum. The Committee did not exercise any discretion
in this outcome although some judgement was required
in interpreting two of the more technical programme
objectives and for this independent third party review
was obtained.
DISPLACING DIESEL
49
Annual Report 2023GOVERNANCEREPORT REMUNERATION COMMITTEE REPORT
LTIP vesting
The final tranche of the legacy transition awards granted in
Directors’ remuneration policy
This section of the report sets out the remuneration policy
the 2021 financial year reached the end of its performance
for Executive Directors and outlines how this policy has
period in March 2023. However, the share price targets
been implemented for the 2023 financial year and will be
were not met and 1,617,188 corresponding options lapsed.
implemented for the 2024 financial year.
All 5,439,229 of the remaining LTIP awards have three-year
vesting periods.
The Remuneration Policy outlines the principles and
framework for remuneration allowing the Board of
In light of continued changes in economic circumstances,
Directors and management to attract and retain high
a mid-year benchmarking review was conducted, and
quality employees with a sustainable and fair approach.
salaries adjusted where required. An inflationary rise of
4.03% was applied to qualifying staff and directors in
The Policy focuses on Board and other members of
November 2023.
Closing remarks
AFC Energy has grown rapidly and made significant
the C-suite within the Company but equally provides a
framework for all other employees regardless of seniority.
The Policy acknowledges the Company’s intention to:
improvements in building processes, particularly around
Promote the long-term success of the Company and
project authorisation and budgeting, while preserving the
ensure the alignment of interests between Senior
culture that has got it to where it is now. We continue to be
Management, Non-Executive Directors and shareholders
guided by investors, employees and other key stakeholders
including but extending beyond value creation;
as we navigate our way through the challenges of ensuring
we have the right people and that they are attracted
and motivated not just to stay but to take the business to
another level. This starts at the top and we look to reward
our leaders while challenging them to go higher without
Provide a remuneration structure which looks to attract
and retain high quality candidates into senior roles within
AFC Energy through being competitive with those of
businesses of similar size; and
excessive risk. We look forward to your continued support
Provide a long-term incentive structure to retain senior
in this journey.
management while ensuring maximum award levels are
capped.
This policy will be reviewed and updated annually by the
Remuneration Committee and discussed from time to time
with shareholders.
Composition of the Committee
Gerry Agnew (Chair)
Duncan Neale
Monika Biddulph
Number of meetings: 2
The Board Chair and Chief Executive Officer sometimes
attend as invitees, when appropriate.
Gerry Agnew
Remuneration Committee Chair
25 March 2024
50
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT REMUNERATION COMMITTEE REPORT
The Policy adopts a framework structured around several key elements, and is summarised in the tables below:
Element
(purpose and link to strategy) Operation
Opportunity
Performance metrics
Company and individual
performance are considered
when setting Executive
Director base salaries.
Base salary
To reflect size and scope
of the role and individual’s
performance and
contribution.
Payable in cash. Generally,
but subject to prevailing
economic conditions and
changes of roles and/ or
responsibilities, salaries
are reviewed annually with
changes effective from the
beginning of the financial
year but may be reviewed at
other times if the Committee
considers this appropriate.
The Committee reviews base
salaries with reference to:
The size and scope of the
individual’s roles
While there is no maximum
salary level, salary increases
will generally be in line with
increases awarded to other
employees in the Company.
However, larger increases
may be made at the
discretion of the Committee
to take into account
circumstances such as:
Changes in an individual’s
role or responsibility
To reflect an individual’s
contribution to the
company
The individual’s
performance and
experience
Where a salary is
significantly behind market
practice
Implementation of
Remuneration Policy for
2024 financial year
Base salaries increased
by 4.03% with effect from
1 November 2023 to:
CEO £333k
CFO £228k
These increases match the
average increase across the
wider workforce.
Pension and other
benefits
To provide market-
competitive benefits and
pension.
Annual bonus
To incentivise executives
to achieve annual financial
and operational targets
in line with key strategic
objectives considering risk
and shareholder interests. For
Board Members this will also
include observations from
prior board effectiveness
reviews.
Business performance
and the external economic
environment
Market practice at other
companies of a similar size
and complexity
Salary increases across
the Group
From 1 November 2021, all
employees have been eligible
for a Company matching
contribution towards AFC
Energy’s chosen pension
provider of 5% of salary
before taxation. Employees in
this scheme also contribute
5% salary towards their
pension. The Committee has
discretion to make alternative
arrangements on a case-by-
case basis. When determining
such arrangements, the
Committee will consider cost
and market practice.
The annual bonus is normally
based on performance
over the financial year and
the bonus plan shall be
documented and updated
annually considering the
Company’s targets and the
individual’s objectives.
After the year-end the
Committee determines the
extent to which pre-defined
targets have been met. The
final quantum of the bonus,
which is subject to an annual
cap, will be dependent upon
success of the executive
in delivering their targets,
with flexibility to adjust up
and down to reflect the
overall performance of
business and individual
performance. Bonuses are
non-pensionable.
For employees that have
reached lifetime allowance
limit, the Company
contribution can be paid as
salary but will not be grossed
up. All other benefits are at an
appropriate level considering
market practice.
Not performance related.
In line with policy, Executive
Directors will receive
5% contribution from
AFC alongside their own
contribution of 5% salary.
Objectives have been set
based on a blend of 40%
financial, 50% operational
and 10% ESG objectives.
An “on target” performance
would be expected to deliver
75% of maximum. A minimum
threshold achievement will
deliver a bonus of not more
than 25% of maximum.
Maximum payout is 120%
salary for the CEO and 80%
for other Executive Directors .
In conjunction with the
Executive Directors,
measures are selected each
year by the Committee to
ensure continued focus on
the Company’s objectives and
in line with the Business Plan.
The Committee may decide
that the bonus entitlement
be subject to a minimum
delivery of the Company’s
financial targets. Typically,
but at the discretion of the
Remuneration Committee,
the indicative split of the
annual bonus going forward
should normally be 40%
financial, 40% operational
and 20% personal objectives.
DISPLACING DIESEL
51
Annual Report 2023GOVERNANCEREPORT REMUNERATION COMMITTEE REPORT
Opportunity
Performance metrics
The maximum award level will
be 120% of salary for the CEO
with the CFO level raised from
70% to 80% salary reflecting
the greater responsibility of
this role with the reduction to
two executive directors. Other
C-suite will not automatically
be eligible to the scheme
but those that do will have
a maximum award equal
to or less than board level
executives.
Performance testing will
be based on Compound
Annual Growth Rate (CAGR
– expressed in % terms) of
Total Shareholder Return
(TSR), which for the time
being is expected to be
entirely share price based
but accommodating future
dividends when these
become possible.
Implementation of
Remuneration Policy for
2024 financial year
Awards are anticipated to be
granted with both Relative
TSR and Absolute TSR
conditions, consistent with
the awards granted during
the 2023 financial year. 2023
financial year. However, LTIP
arrangements are currently
being reviewed and any
changes will be disclosed in
next year’s remuneration
report.
Element
(purpose and link to strategy) Operation
LTIP
To attract and retain
Executive Directors and
Senior Managers of a high
calibre and align their
interests with the long-term
objectives of the Company.
Annual grants of nil-cost
options are scaled according
to salary which then vest
conditionally three years
later based on achievement
of performance targets set
at grant.
The performance share
plan (PSP) will remain within
the overall limit for all option
allocations of 10% of share
capital.
Annual awards will
normally be made after the
announcement of the Interim
Results to avoid potential
conflicts.
Good leavers* will retain
pro-rated awards according
to the fraction of the three-
year period they work for the
Company with details, along
with malus and clawback
terms based on advice from
external advisers regarding
current industry standards.
*Good leavers are typically those leaving through retirement, redundancy, injury or death.
Pay scenario charts
The charts below provide estimates of the potential future reward opportunity for the current Executive Directors in
FY 2023-24 in line with the policy described above. The potential is split between the different elements of remuneration
under four different performance scenarios: “Minimum”, “On Target”, “Maximum” and “Maximum with 50% share
price growth”.
CEO
CEO
CFO
CFO
£1,400k
£1,400k
£1,200k
£1,200k
£1,000k
£1,000k
£800k
£800k
£600k
£600k
£400k
£400k
£200k
£200k
£0k
£0k
Min
On Target
Max
Min
On Target
Max
Max (incl
share price
growth)
Max (incl
share price
growth)
£1,400k
£1,400k
£1,200k
£1,200k
£1,000k
£1,000k
£800k
£800k
£600k
£600k
£400k
£400k
£200k
£200k
£0k
£0k
Min On Target Max
Min On Target Max
Max (incl
share price
growth)
Max (incl
share price
growth)
Fixed pay
Annual Bonus
Fixed pay
Annual Bonus
LTIP
LTIP
Share price growth
Share price growth
52
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT REMUNERATION COMMITTEE REPORT
In illustrating potential reward opportunities, the following assumptions have been made:
Component
Minimum
On-target
Maximum
Maximum + 50%
price growth
Base Salary
Benefits
Pension
CEO: £333k
CFO: £228k
Based on single figure for the 2023 financial year
5% of base salary
Target bonus
(75% of maximum)
Threshold vesting
(25% of maximum)
Maximum bonus
Maximum vesting
Maximum vesting with
50% share price growth
Annual Bonus
No bonus payable
LTIP
No LTIP Vesting
Service contracts
Executive Directors
CEO
CEO
CFO
CFO
£1,400k
£1,400k
£1,200k
£1,200k
£1,000k
£1,000k
£800k
£800k
£600k
£600k
£400k
£400k
£200k
£200k
£0k
£0k
£1,400k
£1,400k
£1,200k
£1,200k
£1,000k
£1,000k
£800k
£800k
£600k
£600k
£400k
£400k
£200k
£200k
£0k
£0k
Min
On Target
Max
Min
On Target
Max
Max (incl
share price
growth)
Max (incl
share price
growth)
LTIP
LTIP
Fixed pay
Annual Bonus
Share price growth
Fixed pay
Annual Bonus
Share price growth
Min On Target Max
Min On Target Max
Max (incl
share price
growth)
Max (incl
share price
growth)
Service contracts for all employees, including the Executive directors, shall specify reasonable notice periods, defined as
normally three to six months and not exceeding one year with no additional liquidated damages clauses.
Payments due on termination shall be limited to basic salary and benefits. Annual bonus payments shall be related only to
the period worked and shall not extend to periods of unworked notice or gardening leave.
Executive Director
Adam Bond
Peter Dixon-Clarke
Jim Gibson
Graeme Lewis
Non-Executive Directors
Date of service contract
1 January 2016
1 December 2022
4 October 2018 (Resigned with effect 9 June 2023)
31 December 2019 (Resigned with effect 30 November 2022)
The Non-Executive Directors signed letters of appointment with the Company for the provision of Non-Executive Directors’
services for an indefinite term, which may be terminated by either party giving three months’ written notice except for Gary
Bullard whose contract specifies one month. The Non-Executive Directors’ fees are determined by the Board.
Non-Executive Director
Date of service contract
Gary Bullard
Joe Mangion
Gerry Agnew
Monika Biddulph
Duncan Neale
5 March 2021
5 December 2017 (Resigned with effect 31 July 2023)
9 September 2019
3 December 2021
1 August 2023
DISPLACING DIESEL
53
Annual Report 2023GOVERNANCEREPORT
REMUNERATION COMMITTEE REPORT
Non-Executive Director policy table
Details of the policy, introduced in the 2022 financial year, on fees paid to our Non-Executive Directors and how this policy
will be implemented for the 2024 financial year are set out in the table below:
Implementation of
Remuneration Policy for
2023-2024
A review of senior non-
executive remuneration was
undertaken in October 2023
with input from remuneration
advisers regarding fees in AIM
listed companies of a similar
size. No significant change
in NED fees was felt to be
necessary, however on the
basis of this advice, the staff
inflationary rise of 4.0% was
applied to non-executive and
chair fees.
Element
(purpose and link to strategy) Operation
Opportunity
Performance metrics
Not applicable.
The fees of Non- Executive
Directors shall normally
be reviewed annually to
ensure that they are in line
with market conditions and
any changes to said fees
will be approved by the
Board as a whole following a
recommendation from the
Chief Executive.
Fees
To attract and retain high-
calibre individuals to serve as
Non-Executive Directors.
Fee levels are set to reflect
the time, commitment and
experience of the Chairman
and the Non- Executive
Directors, taking into
account fee levels at other
companies of a similar size
and complexity and to other
UK companies.
The fees are normally paid in
cash monthly but by mutual
consent may be paid in
shares if this is considered
appropriate. Payments of
shares may be made annually
instead of monthly.
Non-Executive Directors
receive cash fees only and
will not be granted interests
in share option schemes or
warrants.
The Chair and Non-Executive
Directors shall expressly
not participate in any
performance related plans or
bonuses.
Further additional fees may
be paid to reflect additional
time, Committee or Board
responsibilities if this is
considered appropriate.
54
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AFC Energy PLCGOVERNANCEREPORT REMUNERATION COMMITTEE REPORT
Annual report on remuneration
The following section provides details of how AFC Energy’s
During the year, the Committee sought internal support
from the Chief Executive Officer, who attended Committee
remuneration policy was implemented during the 2023
meetings by invitation from the Committee Chair, to advise
financial year.
Remuneration Committee
membership and activities in 2023
The Remuneration Committee’s members at 31 October
on specific questions raised by the Committee and on
matters relating to the performance and remuneration of
senior managers.
The Committee has appointed PricewaterhouseCoopers
2023 were Gerry Agnew, Chair, Monika Biddulph and
(PwC) to provide independent advice on executive
Duncan Neale. All members of the Committee are
remuneration matters. PwC is a signatory to the Code of
independent Non-Executive Directors. Gary Bullard,
Conduct for Remuneration Consultants in the UK. The fees
Company Chairman, was also invited to attend
paid to PwC in relation to advice provided to the Committee
when appropriate.
for the 2023 financial year were £40,000. The Committee
evaluates the support provided by PwC annually and is
The Committee operates under Terms of Reference
comfortable that they remain independent. PWC provide
which set out its duties, including reviewing all senior
advice in relation to the SAYE scheme and no non-
executive appointments and determining the Group’s
remuneration related advice was provided by PwC to the
policy in respect of the terms of employment, including
Group in the year.
remuneration packages of Executive Directors and other
designated members of senior management.
Remuneration Review
During the summer of 2023, the organisation undertook
The Committee’s Terms of Reference are available on
a significant exercise to ensure that rewards were aligned
request from the Company Secretary. The Remuneration
with roles and responsibilities throughout the organisation
Committee met formally twice during the 2023 financial
following significant expansion and with the introduction of
year and also on an ad hoc basis when required.
many new staff.
Remuneration Committee activities during the 2023
At this time, annual salaries and bonus multipliers were
financial year were as follows:
increased for other members of the C-suite and it was
Approval of the Directors’ Remuneration Report
considered appropriate to increase CFO annual bonus
Review and approval of the Executive Directors’
performance against the annual objectives
level from 70 to 80%. This quantum is within the existing
maximum under our remuneration policy.
Determination of performance targets for the C-suite
The organisation continues to evolve as the emphasis of
annual bonus for the year ahead
activity shifts away from research to development and
Determination of performance targets for the LTIP grant
manufacture, and the Committee will continue to consider
appropriate levels of pay which incentivise our senior
Review of developments in corporate governance and
management team to deliver on our strategy.
best practice
Review of remuneration arrangements and policies for
senior management/C-suite
Overseeing the continued implementation of the
all employee SAYE scheme, revised and updated in
recognition of its 10 year anniversary
DISPLACING DIESEL
55
Annual Report 2023GOVERNANCEREPORT REMUNERATION COMMITTEE REPORT
Single total figure of remuneration for Directors
The table below sets out a single figure for the total remuneration received by each Director for the financial year ended
31 October 2023:
Basic
salary/fees
£000
Taxable
benefits
£000
Pension
£000
Annual
bonus
£000
LTIP3
£000
Total
£000
FYE
2023
2022
2023
2022
2023 2022 2023 2022
2023 2022 2023 2022
Executive Director
Adam Bond
319
309
Peter Dixon-Clarke 1
201
Jim Gibson4
Graeme Lewis
235
109
—
232
176
Non-Executive Director
Gary Bullard
100
100
Gerry Agnew5
Monika Biddulph
Joe Mangion
Duncan Neale2
50
50
38
13
37
46
50
—
44
—
29
—
—
—
—
—
—
43
—
34
—
—
—
—
—
—
16
7
12
11
—
—
—
—
—
16
—
12
22
—
—
—
—
—
282
229
129
—
—
—
—
—
—
—
—
114
87
—
—
—
—
—
1,115
950
73
77
46
50
411 430
—
—
—
—
—
—
—
—
—
—
241
661 838
—
337
—
105
276
497
—
120
285
—
100
100
—
—
—
—
50
50
38
13
37
46
50
—
346 1,645 1,853
1 Peter Dixon-Clarke was appointed on 1 Dec 2022.
2 Duncan Neale was appointed on 1 August 2023.
3 The long-term incentive award value shown in the Single total figure of remuneration for each Director relates to LTIP share options that vested in the
financial year. The stated value is calculated based on the number of shares that vested multiplied by the mid-market closing price for a share on the date of
vesting.
4 Jim Gibson resigned on 9 June 2023 and received pay in lieu of holiday. He exercised all 255,136 options that vested during the previous financial year on
5
4 September 2023 realising a gain of £42,302.
In June 2023, Gerry Agnew exercised all 900,000 warrants paid in lieu of salary. These were granted without being subject to performance conditions and
had vested over the prior three financial years. On exercise, these generated a gain of £86,923.
6 Graeme Lewis resigned with effect 30 November 2022. His pension arrangements pre-date the current policy.
Incentive outcomes for the 2023
financial year
Annual bonus in respect of performance
Bonuses for the year were again based on a blend of
40% financial, 50% operational and 10% ESG objectives.
For the financial objectives an overall payout of 26% was
determined reflecting an excellent delivery on closed
sales during the year and cash balances at the year end.
However, the revenue target was not met.
For the operational objectives’ scorecard, 37.5% of a
maximum 50% bonus pool was paid out. In achieving
this determination, the Committee noted excellent
performance in cost reduction and improved resilience of
fuel cell generator units. At the same time differentiating
capability had been demonstrated in modular ammonia
cracker implementation and novel cracker product
cleanup, extending this to fuel cell standard.
Mission critical areas such as health and safety and
progress toward CE certification for fuel cell generators
were also delivered to full requirement.
This is the second year in which an ESG objective
grouping was set and the Committee were pleased to see
performance in this area achieving full 10% payout. The
overall bonus earned across all objective areas came to
73.5% of maximum.
56
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT
REMUNERATION COMMITTEE REPORT
Close out of transitional LTIP
The final tranche of the legacy transition awards granted
and consequently equal 50% weighting was applied to
the relative and absolute elements. In choosing a relative
in 2021 to address gaps in LTIP grant in previous years
metric, the AIM 100 index grouping was retained. The choice
reached the end of its performance period in March
of 75th percentile performance limit seeks to expressly
2023. The share price targets were not met and the
exclude unusual extremes in performance seen in a handful
corresponding options lapsed. All remaining LTIP awards
of stocks at the top end of the market that are actively
have three-year vesting periods.
considering moving onto main market listings. The use
Scheme Interests awarded in the
2023 financial year
For the PSP LTIP grants made in 2022-2023, working in
of median performance as the lower measure ensures a
continued push for stretch and avoids the risk of rewarding
mediocre performance.
conjunction with external advice, continued effort was
For the absolute TSR, it was felt appropriate to return to
given to avoiding windfall outcomes linked to the significant
pure CAGR based growth metrics. Further details of these
sector specific changes in share price seen throughout the
rewards are provided immediately below.
AIM index within the year. it was felt appropriate to continue
the use of a relative element to assessing TSR improvement
Executive Director
Adam Bond
Peter Dixon-Clarke
Nil cost options granted during FY2023
2,142,415
978,042
Performance targets apply to the awards over a three-year period commencing on 01 June 2023 as follows:
Performance measure
Relative TSR vs FTSE AIM 100
Absolute TSR
Weighting
50%
50%
Threshold
performance
(25% vesting)
Median
15% p.a.
Maximum)
performance
(100% vesting
Upper quartile
30% p.a.
Vesting is on a pro-rata basis for performance between the threshold and maximum levels.
Directors leaving during the year
Jim Gibson resigned as a director on 9 June with
Payments to past Directors
During the year previous director Graeme Lewis was
completion of his employment as Chief Operating Officer
compensated in line with his continued employment during
at the end of his contractual notice period. No payments
handover to the new CFO. No payments were made beyond
beyond normal salary and benefits have been made to Jim
normal contractual arrangements as reported in the single
while he has worked this period. No bonus was payable for
figure table.
2023 and all outstanding LTIP awards lapsed on cessation.
The board agreed that Jim would be granted a 6 month
extension of the window in which to exercise his options.
DISPLACING DIESEL
57
Annual Report 2023GOVERNANCEREPORT
REMUNERATION COMMITTEE REPORT
Directors’ interests in shares and options
On 31 October 2023 the Executive Directors’ interests over share options and warrants of the Company were:
Adam Bond
Adam Bond
Adam Bond
Adam Bond
Adam Bond
Adam Bond
Date of grant
15 July 2015
15 July 2015
7 September 2021
7 September 2021
12 July 2022
1 June 2023
Peter Dixon-Clarke
28 April 2023
Peter Dixon-Clarke
1 June 2023
At
1 November
2022
5,000,000
1,000,000
1,125,000
620,970
1,697,802
—
9,443,772
—
—
—
15 August 2018
2,500,000
Jim Gibson
Jim Gibson
Jim Gibson
Jim Gibson
Jim Gibson
7 September 2021
7 September 2021
7 September 2021
12 July 2022
Graeme Lewis
31 December 2019
Graeme Lewis
7 September 2021
Gerry Agnew
9 September 2019
And for shares:
Executive Directors
Adam Bond
Peter Dixon-Clarke
Non-executive Directors
Gary Bullard
Gerry Agnew
Monika Biddulph
Duncan Neale
—
—
—
—
—
2,142,415
2,142,415
500,000
978,042
1,478,042
—
—
—
—
—
—
—
—
—
—
—
Number of shares under option
Awarded
in year
Exercised
in year
Lapsed
At
31 October
2023
— 5,000,000
—
1,000,000
Expiry
Date
17 May 2025
17 May 2025
(1,125,000)
—
6 September 2031
—
—
—
620,970
6 September 2031
1,697,802
2,142,415
11 July 2032
31 May 2033
(1,125,000)
10,461,187
500,000
978,042
1,478,042
27 April 2033
31 May 2033
2,500,000
8 September 2024
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(255,136)
255,136
492,188
271,968
743,590
4,262,882
2,750,000
206,320
2,956,320
900,000
900,000
—
—
—
(492,188)
(271,698)
(743,590)
—
—
—
—
(255,136)
(1,507,746)
2,500,000
— (2,750,000)
—
(206,320)
— (2,956,320)
(900,000)
(900,000)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17,562,974
3,620,457
(1,155,136)
(5,589,066)
14,439,229
Number of shares at
31 October 2023
% of salary at
31 October 2023
3,583,169
—
500,000
621,684
—
—
146
N/A
N/A
—
—
Implementation of policy for the 2024 financial year
In light of continued changes in economic circumstances, an inflationary rise of 4.03%, effective from 1 November 2023,
was applied to all applicable staff and directors. In line with the continued emphasis on applying consistent standards
throughout the organisation, this change was applied from the beginning of the financial year for the entire organisation.
For the 2024 financial year, the annual bonus will continue to use a blend of 40% financial, 50% operational and 10% ESG
objectives, recognising the critical importance of operational delivery in building long-term value while at the same time
driving an increasingly active emphasis on ESG improvements.
LTIP awards are anticipated to be granted during the year with both relative TSR and absolute TSR conditions, consistent
with the awards granted in 2023. However, we are currently reviewing remuneration arrangements for the senior team and
will disclose any changes in next year’s Remuneration Report.
58
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual
Report and financial statements in accordance with
Statement of disclosure to auditor
The Directors confirm that:
applicable law and regulations.
Company law requires the directors to prepare financial
information of which the Company’s auditor is unaware;
statements for each financial year. Accordingly, the
and
So far as each Director is aware, there is no relevant audit
directors have prepared the financial statements in
accordance with UK-adopted international accounting
standards. Under company law the directors must not
approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs and
profit or loss of the company for that period. In preparing
these financial statements, the directors are required to:
The Directors have taken all the steps that they ought
to have taken as directors in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
To the best of our knowledge:
Select suitable accounting policies and then apply them
consistently;
The financial statements, prepared in accordance with
UK-adopted international accounting standards, give a
true and fair view of the assets, liabilities, financial position
Make judgements and estimates that are reasonable
and profit or loss of the Company and the undertakings
and prudent;
included in the consolidation taken as a whole; and
State whether applicable UK-adopted international
The Strategic report and Directors’ report include a
accounting standards have been followed, subject to
fair review of the development and performance of
any material departures disclosed and explained in the
the business and the position of the Company and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks
and uncertainties that they face.
financial statements; and
Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable
accuracy at any time the financial position of the company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
DISPLACING DIESEL
59
Annual Report 2023GOVERNANCEREPORT INDEPENDENT AUDITORS’ REPORT
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of AFC Energy Plc
Material uncertainty related to
going concern
We draw attention to the going concern note within
(the ‘Company’) for the year ended 31 October 2023, which
note 2 to the financial statements, which indicates that
comprise the Statement of comprehensive income, the
additional funding would be required to deliver their
Statement of financial position, the Statement of changes
plans after considering the forecast for 2025 financial
in equity, the Cash flow statement and notes to the financial
year, the downside scenarios, to establish the resilience
statements, including a summary of significant accounting
of the company’s cash reserves, the need to scale up its
policies. The financial reporting framework that has been
manufacturing output and continue to invest in research
applied in their preparation is applicable law and UK-
and development. Note 2 also mentions that the additional
adopted international accounting standards.
funding required has not been sought and secured. As
In our opinion, the financial statements:
other matters as set forth in note 2, indicate that a material
stated in note 2, these events or conditions, along with the
give a true and fair view of the state of the Company’s
Company’s ability to continue as a going concern. Our
affairs as at 31 October 2023 and of its loss for the year
opinion is not modified in respect of this matter.
uncertainty exists that may cast significant doubt on the
then ended;
have been properly prepared in accordance with UK-
adopted international accounting standards; and
In auditing the financial statements, we have concluded
that the director’s use of the going concern basis of
accounting in the preparation of the financial statements is
have been prepared in accordance with the
appropriate.
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the ‘Auditor’s responsibilities for the audit of
Our evaluation of the directors’ assessment of the
Company’s ability to continue to adopt the going concern
basis of accounting included:
challenging management on their determination of their
going concern period;
the financial statements’ section of our report. We are
assessments of management’s forecasting accuracy by
independent of the Company in accordance with the
comparing the accuracy of actual financial performance
ethical requirements that are relevant to our audit of the
to previous forecast information;
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a
basis for our opinion.
an assessment of management’s cash flow forecasts
to reflect the potential impact of macroeconomic
challenges on trading results, and cashflow forecasts
throughout the forecast period;
sensitivity analysis of management’s cash flows forecasts
including the robustness of the scenarios modelled ;
discussion with those outside of the finance team to gain
a more robust understanding of future expectations and
developments of the Company;
challenging management on the costs expected to ramp
up operations and timeline for that to occur, including
outlays and expected inflows of revenues; and
challenging management on the sufficiency and
appropriateness of the disclosures within the notes to the
financial statements.
60
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT Our responsibilities
We are responsible for concluding on the appropriateness
of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required
to draw attention in our report to the related disclosures
in the financial statements or, if such disclosures are
inadequate, to modify the auditor’s opinion. Our conclusions
are based on the audit evidence obtained up to the date of
our report. However, future events or conditions may cause
the Company to cease or continue as a going concern.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our approach to the audit
Overview of our audit approach
Overall materiality: £742,000, which represents 4.5% of the Company’s
average loss before tax from the previous three years.Key audit matters were
identified as:
Materiality
Key audit
matters
Key audit matters were identified as
going concern (new in current year);
Scoping
risk of incorrect accounting of the open contracts with customers
and incomplete recognition of the loss provision in relation to contract
accounting (same as previous year).
Our auditor’s report for the year ended 31 October 2022 included one key
audit matter related to the revenue recognition, and in the current year, we
pinpointed the significant risk to the accounting for open contracts with
customers.
We performed a full-scope audit of the financial statements of the Company. A
site visit was completed as part of our audit procedures, as well as attendance
at the year-end stock count.
DISPLACING DIESEL
61
Annual Report 2023GOVERNANCEREPORT INDEPENDENT AUDITORS’ REPORT
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance in our
audit of the financial statements of the current period and
include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we
identified. These matters included those that had the
greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Description
Audit response
KAM
Disclosures
Our results
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Overstatement of
expenses included
in R&D tax credit
claim
Risk of incorrect accounting
of the open contracts with
customers and incomplete
recognition of the loss
provision in relation to
contract accounting
Accuracy and completeness of
intangible assets, including treatment of
development costs expensed through the
income statement
Going concern
Potential
financial
statement
impact
Risk of fraud in
revenue
recognition
Management
override of
controls
Existence and
accuracy of
cash
Accounting for
share based
payments
Low
Low
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
62
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT
In addition to the matter described in the ‘Material uncertainty related to going concern’ section, we have determined the
matter described below to be the key audit matter to be communicated in our report.
Key Audit Matter
How our scope addressed the matter
Risk of incorrect accounting of the open contracts
In responding to the key audit matter, we performed the
with customers and incomplete recognition of the loss
following audit procedures:
provision in relation to contract accounting
Assessed management’s accounting for revenue from
We identified incorrect accounting of the open contracts
contracts with customers in line with IFRS15, particularly
with customers and incomplete recognition of the loss
in relation to the modification in the year, to check if
provision in relation to contract accounting as one of the
the contract had been correctly recognised as per the
most significant assessed risks of material misstatement
standard;
due to error.As the Company continues to commercialise
its products, the more important revenue growth is to
stakeholders. Further, the recognition of revenue requires
management to make judgements relating to the nature
and terms of the contract, such as the identification of
Assessed and challenged management’s identification
of performance obligations arising from the contract
modifications in the period, and how this affected the
delivery of goods to customers;
performance obligations, allocation of price to those
Assessed the transaction price of the contract in the
obligations and timing of revenue recognition.
context of other consideration paid by the customer
Revenue is recognised in accordance with International
Financial Reporting Standard (IFRS) 15 ‘Revenue from
Contracts with Customers’ and recognition of revenue
requires management to make significant judgements.
As a result of the company beginning commercialisation
of products whilst not having a history of product delivery
and establishing consistent costs of delivery on new
products, there is a heightened risk of onerous contracts
and inappropriate recognition of commercial contracts
with customers.
against what they received, to determine if the allocation
of the price to performance obligations was reasonable
based on the terms;
Challenged management’s assessment of accounting
for the contract performance obligations at a point in
time, rather than over time, and when to recognise the
revenue and costs from fulfilling these obligation;
Assessed whether the loss provision policy is in
accordance with the requirements of Internatioanal
Accounting Standard (IAS) 37 ‘Provisions, Contingent
Liabilities and Contingent Assets’ and IFRS 15 and
There is a significant level of judgment in assessing
whether they were applied appropriately for the
performance obligations and allocating contract
contracts; and
Assessed and challenged the appropriateness and
completeness of the financial statement disclosures.
transaction prices in order to then assess the onerous
nature of a contract. If expected costs outweigh the selling
price, a provision must be recorded immediately. The level
of judgement involved in determining the estimated costs
results in this being a significant risk.
From our assessment of contracts, we identified that
there was a modification of a key long term contract that
resulted in significant judgement around the recognition of
the performance obligations, calculation and allocation of
the transaction price, as well as challenge on recognising
the revenue over time.
The accounting treatment under IFRS 15 requires the
company to consider whether the modification results in
an onerous contract.
DISPLACING DIESEL
63
Annual Report 2023GOVERNANCEREPORT INDEPENDENT AUDITORS’ REPORT
Key Audit Matter
How our scope addressed the matter
Relevant disclosures in the Annual Report
Our results
Financial statements: Note 5, Revenue.
Based on our audit work addressing the risk of incorrect
accounting of the open contracts with customers and
incomplete recognition of the loss provision in relation to
contract accounting, we are satisfied that assumptions
made by management are appropriate and in accordance
with the financial reporting framework, including IAS 37 and
IFRS 15.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the
opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Company
Materiality for financial statements
as a whole
We define materiality as the magnitude of misstatement in the financial
statements that, individually or in the aggregate, could reasonably be expected
to influence the economic decisions of the users of these financial statements.
We use materiality in determining the nature, timing and extent of our audit
work.
Materiality threshold
£742,000, which represents 4.5% of the Company’s average loss before tax from
the previous three years.
Significant judgements made by
In determining materiality, we made the following significant judgements:
auditor in determining materiality
Loss before tax is considered the most appropriate benchmark due to the
Company being within the development phase of its lifecycle. We chose to
use a three year average given the continued loss position and the potential
volatility in earnings due to being a development stage entity. It is also a
key performance measure for the Company and therefore of interest to
stakeholders.
The engagement team selected a measurement percentage of 4.5% of the
Company’s loss before tax. This was based on the complexity and the size
of the Company and the continuing uncertainties in the macro-economic
environment.
Materiality for the current year is higher than the level that we determined for the
year ended 31 October 2022 to reflect the increase in the Company’s three year
average loss before tax for the current year.
64
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT Materiality measure
Company
Performance materiality used to
drive the extent of our testing
We set performance materiality at an amount less than materiality for the
financial statements as a whole to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Performance materiality threshold
£482,000, which is 65% of financial statement materiality.
Significant judgements made by
In determining performance materiality, we considered all pertinent facts from
auditor in determining performance
prior period audits, including the level of unadjusted misstatements and the
materiality
Company’s control environment.
Specific materiality
We determine specific materiality for one or more particular classes of
transactions, account balances or disclosures for which misstatements of
lesser amounts than materiality for the financial statements as a whole could
reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
Specific materiality
We determined a lower level of specific materiality for certain areas such as
directors’ remuneration and related party transactions.
Communication of misstatements
to the audit committee
We determine a threshold for reporting unadjusted differences to the audit
committee.
Threshold for communication
£37,100 and misstatements below that threshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for
potential uncorrected misstatements.
Overall materiality
Average loss
before tax from the
previous 3 years
£16,487,000
FSM
£742,000,
4.5%
FSM: Financial statements
PM
£482,000, 65%
materiality
PM: Performance materiality
TFPUM: Tolerance for potential
uncorrected misstatements
TFPUM
£260,000,
35%
DISPLACING DIESEL
65
Annual Report 2023GOVERNANCEREPORT
INDEPENDENT AUDITORS’ REPORT
An overview of the scope of
our audit
We performed a risk-based audit that requires an
understanding of the Company’s business and in particular
matters related to:
Changes in approach from previous period
the scope of the audit for the current year in broadly
consistent with the scope applied in the previous year’s
audit. The following scope changes have been made to
reflect changes within the Company:
Understanding the Company and its environment,
including controls
the engagement team obtained an understanding of the
Company and its environment, including the controls, and
assessed the risks of material misstatement.
–– Reducing the identified prior year significant risk of
fraud in revenue recognition as a result of immaterial
nature of revenue amount, our enquiries with
management and obtaining an understanding of the
revenue relating to significant contracts entered into by
the Company.
Work to be performed on financial information of the
Company (including how it addressed the key audit
matters)
an audit of the financial information of the Company has
been completed to financial statement materiality (full-
scope audit), with specific focus on going concern and the
risk of incorrect accounting of the open contracts with
customers and incomplete recognition of loss provisions
in relation to contract accounting, which were identified
as key audit matters.
Performance of our audit
a full-scope audit was performed by the engagement
team, including an evaluation of the internal control
environment and related management controls over the
financial processes linked to the significant risks;
Other information
The other information comprises the information included
in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are
responsible for the other information contained within the
annual report. Our opinion on the financial statements does
not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
the engagement team evaluated the general IT controls,
are required to determine whether there is a material
the accounts production process and controls over
misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that
there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
critical accounting matters;
the engagement team undertook substantive testing
on significant transactions, balances and disclosures,
the extend of which was dependant on various
factors including our overall assessment of the control
environment and the management of specific risks; and
the engagement team completed a site visit of the
Company’s premises at the planning and fieldwork
stages of the audit, as well as observing the client’s stock
count.
66
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT Our opinions on other matters
prescribed by the Companies Act
2006 are unmodified
In our opinion, the part of the directors’ remuneration report
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement on page 59, the directors are responsible for
the preparation of the financial statements and for being
to be audited has been properly prepared in accordance
satisfied that they give a true and fair view, and for such
with the Companies Act 2006.
internal control as the directors determine is necessary to
In our opinion, based on the work undertaken in the course
from material misstatement, whether due to fraud or error.
enable the preparation of financial statements that are free
of the audit:
the information given in the strategic report and the
responsible for assessing the Company’s ability to continue
directors’ report for the financial year for which the
as a going concern, disclosing, as applicable, matters
financial statements are prepared is consistent with the
related to going concern and using the going concern basis
financial statements; and
of accounting unless the directors either intend to liquidate
In preparing the financial statements, the directors are
the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
Matter on which we are required
to report under the Companies
Act 2006
In the light of the knowledge and understanding of the
company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the directors’ report.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. The extent to which
the financial statements and the part of the directors’
our procedures are capable of detecting irregularities,
remuneration report to be audited are not in agreement
including fraud is detailed below:
with the accounting records and returns; or
certain disclosures of directors’ remuneration specified
by law are not made; or
We obtained an understanding of the legal and
regulatory frameworks applicable to the Company and
the industry in which it operates. We determined that the
we have not received all the information and explanations
following laws and regulations were the most significant:
we require for our audit.
the Companies Act 2006, UK-adopted international
accounting standards, the AIM Rules for Companies, tax
legislation and the QCA Corporate Governance Code;
DISPLACING DIESEL
67
Annual Report 2023GOVERNANCEREPORT INDEPENDENT AUDITORS’ REPORT
In addition, we concluded that there are certain specific
regulations is from events and transactions reflected in
laws and regulations that may have an effect on the
the financial statements, the less likely we would become
determination of amounts and disclosures in the financial
aware of it;
statements and we identified those laws and regulations
as those relating to health and safety, employee matters,
environmental matters and bribery and corruption
matters;
We enquired of management and those charged with
governance concerning the Company’s policies and
procedures relating to the identification, evaluation and
compliance with laws and regulations and the detection
The engagement partner’s assessment of the
appropriateness of the collective competence and
capabilities of the engagement team including
consideration of the engagement team’s:
–– understanding of, and practical experience with, audit
engagements of a similar nature and complexity
through appropriate training and participation;
and response to the risks of fraud. We also enquired of
–– knowledge of the industry in which the Company
management and those charged with governance as
operates; and
to whether they were aware of any instances of non-
compliance with laws and regulations and whether they
had any knowledge of actual, suspected or alleged fraud.
–– understanding of the legal and regulatory
requirements specific to the Company.
We corroborated the results of our enquiries to relevant
We communicated relevant laws and regulations and
supporting documentation;
potential fraud risks to all engagement team members
We assessed the susceptibility of the financial statements
to material misstatement, including how fraud might
occur by evaluating management’s incentives
and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the
audit.
and opportunities for manipulation of the financial
A further description of our responsibilities for the
statements. Audit procedures performed included:
audit of the financial statements is located on the
–– identifying and assessing the design and
implementation of controls management has in place
to prevent and detect fraud;
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
–– obtaining an understanding how those charged with
governance considered and addressed the potential
Use of our report
This report is made solely to the Company’s members,
for override of controls or other inappropriate influence
as a body, in accordance with Chapter 3 of Part 16 of the
over the financial reporting process;
Companies Act 2006. Our audit work has been undertaken
–– challenging assumptions and judgements made by
management in its significant accounting estimates;
and
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
–– identifying and testing journal entries posted in the
to anyone other than the Company and the Company’s
year and post year-end which were deemed to be
members as a body, for our audit work, for this report, or for
unusual
the opinions we have formed.
These audit procedures were designed to provide
reasonable assurance that the financial statements
were free from fraud or error. The risk of not detecting
a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error
and detecting irregularities that result from fraud is
inherently more difficult than detecting those that result
from error, as fraud may involve collusion, deliberate
concealment, forgery or intentional misrepresentations.
Also, the further removed non-compliance with laws and
Christopher Raab, ACA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
25 March 2024
68
DISPLACING DIESEL
AFC Energy PLCGOVERNANCEREPORT STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2023
Revenue from customer contracts
Cost of sales
Gross (loss)/profit
Other income
Operating costs
Operating loss
Finance income
Finance costs
Loss before tax
Taxation
Loss for the financial year and total comprehensive loss
attributable to the owners of the Company
Basic loss per share (pence)
Diluted loss per share (pence)
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
227
(294)
(67)
41
(19,994)
(20,020)
512
(53)
(19,561)
2,086
582
(467)
115
22
(19,749)
(19,612)
143
(19)
(19,488)
3,042
(17,475)
(16,446)
(2.36)
(2.36)
(2.24)
(2.24)
Note
5
6
11
11
12
13
13
All amounts relate to continuing operations. There was no other comprehensive income in the year (2022: £nil).
The notes on pages 73 to 97 form part of these financial statements.
DISPLACING DIESEL
69
FINANCIAL STATEMENTSAnnual Report 2023 STATEMENT OF FINANCIAL POSITION
As at 31 October 2023
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
Note
Assets
Non-current assets
Intangible assets
Right-of-use assets
Tangible fixed assets
Current assets
Inventory
Trade and other receivables
Income tax receivable
Cash and cash equivalents
Restricted cash
Total assets
Current liabilities
Payables
Lease liabilities
Non-current liabilities
Lease liabilities
Provisions
Total liabilities
Capital and reserves attributable to the owners of the Company
Share capital
Share premium
Other reserve
Retained loss
Total equity attributable to shareholders
Total equity and liabilities
14
15
16
17
18
12
19
19
20
21
21
22
23
23
The notes on pages 73 to 97 form part of these financial statements.
These financial statements were approved and authorised by the Board on 25 March 2024.
Adam Bond
Peter Dixon-Clarke
Chief Executive Officer
Chief Financial Officer
264
1,097
3,756
5,117
178
1,231
2,088
27,366
258
31,121
36,238
3,728
477
4,205
647
301
948
5,153
746
118,520
3,779
(91,960)
31,085
36,238
311
976
3,282
4,569
43
1,160
4,075
40,220
612
46,110
50,679
3,644
298
3,942
698
301
999
4,941
735
116,487
4,073
(75,557)
45,738
50,679
AFC Energy plc
Registered number: 05668788
70
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2023
Balance at 1 November 2021
Loss after tax for the year
Issue of equity shares
Equity settled share-based payments
- Lapsed or exercised in the year
- Charged in the year
Fair value of warrants accounted for as equity
Share
Capital
£000
734
Share
Premium
£000
116,448
Other
Reserve
£000
2,456
Retained
Loss
£000
Total
£000
(59,752)
59,886
—
1
—
—
—
—
39
—
—
—
—
—
(641)
1,682
576
(16,446)
(16,446)
—
641
—
—
40
—
1,682
576
Balance at 31 October 2022
735
116,487
4,073
(75,557)
45,738
Loss after tax for the year
Issue of equity shares
Equity settled share-based payments
- Lapsed or exercised in the year
- Charged in the year
Fair value of warrants accounted for
as equity
—
10
1
—
—
—
1,990
43
—
—
—
—
(17,475)
(17,475)
—
2,000
(1,072)
778
—
1,072
—
—
44
778
—
Balance at 31 October 2023
746
118,520
3,779
(91,960)
31,085
Share capital is the amount subscribed for shares at the nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of these
shares net of share issue expenses.
Other reserve represents the charge to equity in respect of unexercised equity-settled share-based payments and
warrants granted.
Retained deficit represents the cumulative loss of the Company attributable to equity shareholders.
The notes on pages 73 to 97 form part of these financial statements.
DISPLACING DIESEL
71
FINANCIAL STATEMENTSAnnual Report 2023
CASH FLOW STATEMENT
For the year ended 31 October 2023
Cash flows from operating activities
Loss before tax for the year
Adjustments for:
Amortisation of intangible assets
Impairment of intangible assets
Loss on disposal of intangible assets
Depreciation of right-of-use assets
Depreciation of tangible fixed assets
Impairment of tangible fixed assets
Loss on disposal of property and equipment
Depreciation of decommissioning asset
Equity-settled payments
Interest receivable
Lease finance charges
Cash flows from operations
R&D tax credits received
Decrease in restricted cash
(Increase)/decrease in inventory
(Increase) in receivables
Increase in payable
(Decrease) in provisions
Cash absorbed by operating activities
Purchase of plant and equipment
Additions to intangible assets
Interest received
Net cash absorbed by investing activities
Proceeds from the issue of share capital
Proceeds from the exercise of options
Proceeds from the grant of warrants
Lease interest paid
Lease payments
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
The notes on pages 73 to 97 form part of these financial statements.
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
Note
(19,561)
(19,488)
14
14
14
15
16
16
16
24
16
14
11
25
21
21
19
110
—
1
455
1,084
—
34
15
778
(428)
69
(17,443)
4,073
354
(135)
(109)
121
—
(13,139)
(1,607)
(63)
428
(1,242)
2,000
45
—
(69)
(449)
1,527
(12,854)
40,220
27,366
473
294
—
379
974
255
126
20
1,682
(143)
33
(15,395)
546
—
618
(145)
1,948
(353)
(12,781)
(2,388)
(334)
151
(2,571)
—
40
576
(38)
(381)
197
(15,155)
55,375
40,220
72
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1. Corporate information
AFC Energy Plc (the Company) is a public limited company incorporated in England & Wales. The address of the registered
office is Unit 71.4, Dunsfold Park, Cranleigh, Surrey, GU6 8TB. The Company is quoted on the AIM Market of the London Stock
Exchange with the ticker symbol LSE:AFC.
The principal activity of the Company is the development of fuel cell and fuel processing technology and equipment.
2. Basis of preparation
Going concern
The financial statements of AFC Energy plc have been prepared in accordance with UK Adopted International Accounting
Standards (IASs).
The financial statements have been prepared on a going concern basis notwithstanding the trading losses being carried
forward and the expectation that the trading losses will continue for the near to medium future as the Company transitions
from predominantly undertaking research and development to a more commercial basis.
In line with normal practice, and prior to signing this report, the Directors are required to assess whether it is appropriate to
prepare the financial statements on a going concern basis. In making this assessment the Directors need to be satisfied that
the Company can meet its obligations as they fall due for at least 12 months from the date of this report.
As part of this assessment, the Directors reviewed the Company’s forecast cash position through to the end of the 2025
financial year. This was based on the agreed budget for the 2024 financial year and the forecast for the 2025 financial year.
As the period goes beyond the 12 months required it provides additional information when making the assessment. To reach
the end of 2025 with positive cash would require at least £7 million of additional funding, however this amount would not be
enough for the Company to scale up at its preferred rate.
In addition, the Board reviewed possible downside scenarios to establish the resilience of the Company’s cash reserves and
identified the impact of continuing high levels of cost inflation, particularly on employee remuneration and supply chain,
combined with delays of sales receipts as a particular risk.
Based on this assessment, and the Company’s intention to capitalise on its growing market opportunities by scaling up its
manufacturing output and continuing to invest in research and development, the Board has concluded that additional funding
will be required to deliver on these plans.
Whilst the Company is a going concern, the fact that the additional funding required has not yet been sought and secured
indicates the existence of a material uncertainty that may cast significant doubt on the Company’s ability to continue as a
going concern.
Whilst the Board recognises the challenges of fundraising in the current economic climate, it is confident that when the
Company does choose to seek additional funding that it will be available. This view is based primarily on the:
recent technical successes of both the fuel cell and fuel processing teams;
UK Government requirements for construction tenders to include a non-diesel solution for onsite electricity generation;
growing levels of interest expressed by the construction market in the recent joint venture with Speedy Hire plc;
positive feedback from external advisors; and
growing levels of institutional engagement, in both the fuel cell and fuel processing value streams, particularly following
recent site visits.
Based on the above, the Directors have concluded that the Company remains a going concern and these financial
statements have therefore been prepared on that basis.
The accounting policies set out below have, unless otherwise stated, been applied consistently in these financial statements.
DISPLACING DIESEL
73
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
Judgments made by the Directors in the application of these accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3.
Standards, amendments and interpretations to published standards not yet effective
The following amendments to the accounting standards, issued by the IASB and endorsed by the UK, were adopted by the
Company from 1 November 2022 with no material impact on the Company’s results, financial position or disclosures:
Amendments to IFRS 3 Updating a Reference to the Conceptual Framework.
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use.
Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract.
Amendments to Annual improvements 2018-2020 – IFRS 9 – Fees in the ‘10 per cent’ Test and IFRS 16 – Lease incentives.
Amendments to IAS 12 International Tax Reform – Pillar Two Model Rules.
The following standard and amendments issued by the IASB have been endorsed by the UK and have not been adopted by
the Company:
IFRS 17 – Insurance contracts (effective from the year ending 30 June 2024) is ultimately intended to replace IFRS 4. Based
on a preliminary assessment, management believes that the adoption of IFRS 17 will not have a significant impact on the
Company’s results or financial position.
Amendments to IAS 12 – Income taxes (effective from the year ending 30 June 2024) requires an entity to recognise
deferred tax on initial recognition of particular transactions to the extent that the transaction gives rise to equal amounts
of deferred tax assets and liabilities. The proposed amendments would apply to transactions such as leases and
decommissioning obligations for which an entity recognises both an asset and a liability. Management believes that the
adoption of these amendments will not have a significant impact on the Company’s results and financial position.
There are a number of other amendments and clarifications to IFRSs, effective in future years, which are not expected to
significantly impact the Company’s results or financial position.
Capital policy
The Company manages its equity as capital. Equity comprises the items detailed within the principal accounting policy
for equity and financial details can be found in the statement of financial position. The Company adheres to the capital
maintenance requirements as set out in the Companies Act 2006.
Revenue recognition
To determine whether to recognise revenue, a five-step process is followed:
Identifying the contract with a customer;
Identifying the performance obligations;
Determining the transaction price;
Allocating the transaction price to the performance obligations; and
Recognising revenue as the performance obligations are satisfied.
Complex contracts include competing priorities such as financial targets, support capabilities, and delivery schedules. A
complex contract will have multiple independent issues which must all be negotiated individually.
Revenue is generated from complex contracts covering the:
Sale of goods and parts,
Sale of services and maintenance, and
Short-term rental contracts which may be either single or multiple contracts. Multiple contracts are accounted for as a
single contract where one or more of the following criteria are met:
• The contracts were negotiated as a single commercial package,
• Consideration of one contract depends upon the other contract, or
• Some or all the goods and services comprise a single performance obligation.
The promises in each contract are analysed to determine if these represent performance obligations individually, or in
74
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC combination with other promises. Performance obligations in the contracts are analysed between either distinct physical
goods and services delivered or service level agreements. The transaction price of the performance obligations is based upon
the contract terms considering both cash and non-cash consideration. Non-cash consideration is valued at fair value taking
into consideration contract terms and known arm’s length pricing where available. In the event there are multiple performance
obligations in a contract, the price is allocated to the performance obligations based on the relative costs of fulfilling each
obligation plus a margin.
Revenue is recognised either at a point in time or over time, as the performance obligations are satisfied by transferring
the promised goods or services to its customers. Deferred revenue is recognised for consideration received in respect of
unsatisfied performance obligations and the Company reports these amounts as payables in the statement of financial
position.
Similarly, if a performance obligation is satisfied in advance of any consideration, a receivable is recognised in the statement of
financial position.
Rental as service and long-term service contracts
Revenue is recognised over time based on outputs provided to the customer, because this is the most accurate measurement
of the satisfaction of the performance obligation as it matches the consumption of the benefits obtained by the customer.
The customer is simultaneously receiving and consuming the benefits as the Company performs its obligations. Revenue can
comprise a fixed rental charge and a variable charge related to the usage of assets or other services including pass-through
costs where pass-through refers to the variable charge, for example Hydrogen.
Sale (standard products) contracts
Revenue from standard products will be recognised at a point of time only when the performance obligation has been fulfilled
and ownership of the goods has transferred, which is typically factory or site acceptance test, which is the official handover
of control of the goods to the customer. As the products are not deemed to be bespoke, there are alternative uses to the
Company as the products would be able to be resold to other customers.
During the product build, deposits and progress payments will be reflected in the balance sheet as deferred revenue.
Costs incurred on projects to date will not be included in the statement of comprehensive income but will be accumulated
on the balance sheet as work in progress (as they are considered recoverable) and transferred to cost of sales once the
revenue applicable to those costs can be recognised in the accounts. Should anticipated costs exceed anticipated revenues,
a provision will be recognised and the surplus costs expensed with immediate effect.
Sale (customised products) contracts
Revenues for customised contracts will be recognised over time according to how much of the performance obligation has
been satisfied. This is measured using the input method, comparing the extent of inputs towards satisfying the performance
obligation with the expected total inputs required. Any changes in expectation are reflected in the total inputs figure as
they become known. The progress percentage obtained is then applied to the revenue associated with that performance
obligation. The revenue should be recognised over a point in time as the products under these contracts would be bespoke
and therefore not have an alternative use. These contracts would have an enforceable right to payment for performance
completed to date.
Other income
Other income represents sales of waste materials and government contracts, and the accounting policy follows IFRS 15 for
point-in-time revenue recognition.
Development costs
Identifiable non-recurring engineering and design costs and other prototype costs incurred to develop a technically and
commercially feasible product are assessed. In accordance with IAS 38 Development costs and capitalised if they meet all of
the criteria required as below:
technical feasibility of completing the asset for use or sale;
intention to complete the asset for use or sale;
ability to use or sell the asset;
generation of probable future economic benefits;
DISPLACING DIESEL
75
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
availability of adequate technical and financial resources; and
ability to measure the attributable expenditure reliably.
Foreign currency
The financial statements of the Company are presented in the currency of the primary economic environment in which
it operates (the functional currency) which is pounds sterling. In accordance with IAS 21, transactions entered into by the
Company in a currency other than the functional currency are recorded at the rates ruling when the transactions occur.
At each Statement of Financial Position date, monetary items denominated in foreign currencies are retranslated at the rates
prevailing at the date of the Statement of Financial Position.
Inventory
Inventory is recorded at the lower of actual cost and net realisable value, applying the average cost methodology.
Work in progress comprises direct labour, direct materials and direct overheads. Direct Labour will be allocated on an input
basis that reflects the consumption of those resources in the production process.
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise cash balances and bank overdrafts that
form an integral part of the Company’s cash management process. They are recorded in the statement of financial position
and valued at amortised cost.
Restricted cash represents bank deposit accounts where disbursement is dependent upon certain contractual performance
conditions.
Other receivables
These assets are initially recognised at fair value and are subsequently measured at amortised cost less any provision for
impairment.
Tangible fixed assets
Property and equipment are stated at cost less any subsequent accumulated depreciation and impairment losses. Where
parts of an item of property and equipment have different useful lives, they are accounted for as separate items of property
and equipment.
Depreciation is charged to the statement of comprehensive income within cost of sales and/or operating expenses on a
straight-line basis over the estimated useful lives of each part of an item of plant, machinery and equipment. The estimated
useful lives are as follows:
Decommissioning asset
Plant, machinery and equipment
Computer equipment
Manufacturing and test stands
Motor vehicles
Demonstration equipment
Rental fleet
Life of the lease
1 to 3 years
3 years
3 years
3 to 4 years
3 to 10 years
3 to 10 years
Expenses incurred in respect of the maintenance and repair of property and equipment are charged against income when
incurred. Refurbishment and improvement expenditure, where the benefit is expected to be long lasting, is capitalised as part
of the appropriate asset.
The useful economic lives of tangible fixed assets are reviewed annually, and any revision is accounted for as a change in
76
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC accounting estimate and the net book value of the asset, at the time of the revision, is depreciated over the remaining revised
economic life of the asset.
Right-of-use assets
At inception each contract is assessed as to whether it conveys the right to control the use of an identified asset and obtain
substantially all the economic benefits from the use of that asset, for a period in exchange for consideration. If so, the contract
should be accounted for as a lease and the Company should recognise a right-of-use asset, and related lease liability, at the
lease commencement date.
The right-of-use asset comprises the corresponding lease liability, lease payments made before the commencement date,
less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses. The lease liability is initially measured at the present value of the lease payments and
discounted using the interest rate implicit in the lease or, if that rate cannot be determined, the incremental borrowing rate is
used. The lease liability continues to be measured at amortised cost using the effective interest method. It is remeasured when
there is a change in the future lease payments. When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset.
At lease commencement date, a right-of-use and lease liability are recognised on the statement of financial position. The
right-of-use asset is measured at cost, which comprises the initial measurement of the lease liability, any initial direct costs
incurred, an estimate of costs to dismantle and remove the asset at the end of the lease term and any lease payments made
in advance of the lease commencement date.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in-substance
fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be exercised.
After initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect
any reassessment or modification, or if there are changes to in-substance payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if
the right-of-use asset is already reduced to zero.
Short-term leases and low value assets are accounted for using the practical expedients set out in IFRS 16 and the payments
are recognised as an expense in profit or loss on a straight-line basis over the lease term.
The Company has elected not to recognise right-of-use assets and lease liabilities for leases of less than 12-months and
leases of low value assets. These largely relate to short-term rentals of equipment. The lease payments associated with these
leases are expensed on a straight-line basis over the lease term.
Intangible assets
The useful economic lives of intangible fixed assets are reviewed annually, and any revision is accounted for as a change in
accounting estimate and the net book value of the asset, at the time of the revision, is amortised over the remaining revised
economic life of the asset.
Other intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and impairment
losses. Amortisation of intangible assets is charged using the straight-line method to operating expenses over the following
periods:
Development costs
Patents
Commercial rights
5 years
10 to 20 years
5 years
Impairment testing of intangible assets and property, plant and equipment
At each statement of financial position date, the carrying amounts of the assets are reviewed to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated to determine the extent of the impairment loss (if any). In assessing whether an impairment is required, the
carrying value of the asset is compared with its recoverable amount. The recoverable amount is the higher of the fair value
less costs of disposal (FVLCD) and value in use (VIU).
DISPLACING DIESEL
77
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
Financial instruments
Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than
those classified as fair value through profit or loss (FVTPL), directly attributable transaction costs. Receivables are initially
recognised at transaction price. Financial instruments are recognised when the Company becomes a party to the contracts
that give rise to them and are classified as amortised cost, fair value through profit or loss or fair value through other
comprehensive income, as appropriate. The Company considers whether a contract contains an embedded derivative when
the entity first becomes a party to it. The embedded derivatives are separated from the host contract if the host contract
is not measured at fair value through profit or loss and when the economic characteristics and risks are not closely related
to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly
modifies the cash flows that would otherwise be required.
In the periods presented the Company does not have any financial assets categorised as FVTPL or FVOCI.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold assets to
collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding and is not designated as FVTPL. Financial assets classified as
amortised cost are measured after initial recognition at amortised cost using the effective interest method. Cash, restricted
cash, trade receivables and certain other assets are classified as, and measured at, amortised cost.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is
classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Gains and losses
are recognised in net earnings when the liabilities are derecognised as well as through the amortisation process. Borrowing
liabilities are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for
at least 12 months after the statement of financial position date. Accounts payable and accrued liabilities and lease liabilities
are classified as, and measured at, amortised cost.
Impairment of financial assets
A loss allowance for expected credit losses is recognised in the Statement of Comprehensive Income for financial assets
measured at amortised cost. At each balance sheet date, on a forward-looking basis, the Company assesses the expected
credit losses associated with its financial assets (such as trade receivables) carried at amortised cost.
The expected loss rates are based on the historical credit losses adjusted to reflect current and forward-looking information
on economic factors affecting the ability of the customers to settle the receivables.
The impairment methodology applied depends on whether there has been a significant increase in credit risk. The expected
credit losses are required to be measured through a loss allowance at an amount equal to the 12-month expected credit
losses (expected credit losses that result from those default events on the financial instrument that are possible within 12
months after the reporting date), or full lifetime expected credit losses (expected credit losses that result from all possible
default events over the life of the financial instrument). A loss allowance for full lifetime expected credit losses is required for a
financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition.
Derecognition of financial assets and liabilities
A financial asset is derecognised when either the rights to receive cash flows from the asset have expired or the Company
has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows
in full without material delay to a third party. If neither the rights to receive cash flows from the asset have expired nor the
Company has transferred its rights to receive cash flows from the asset, the Company will assess whether it has relinquished
control of the asset or not. If the Company does not control the asset, then derecognition is appropriate. A financial liability is
derecognised when the associated obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement
of Comprehensive Income.
78
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC Share-based payment transactions
The fair value of options granted under the Employee Share Option Plan, the Employee Performance Share Plan and the
Save-As-You-Earn scheme are recognised as an employee benefits expense, with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the options granted:
Including any market performance conditions (e.g., the Company’s share price)
Excluding the impact of any service and non-market performance vesting conditions (e.g., profitability, sales growth targets
and remaining an employee for a specified time)
Including the impact of any non-vesting conditions (e.g., the requirement for employees to save or hold shares for a specific
period)
The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are
to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest
based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in
profit or loss, with a corresponding adjustment to equity.
Modifications after the vesting date to terms and conditions of equity-based payments which increase the fair value are
recognised over the remaining vesting period. If the fair value of the revised equity-based payments is less than the original
valuation, then the original valuation is expensed as if the modification never occurred.
The fair value of warrants issued is also recognised as a share-based payment expense with a corresponding increase in
equity.
Provisions
Provisions are recognised when the Company has a present obligation as a result of a past event and it is probable that
the Company will be required to settle the obligation. Provisions are measured at the present value of management’s best
estimate of the expenditure required to settle the present obligation at the Statement of Financial Position date and are
discounted to present value where the effect is material.
Provisions include onerous contracts (see later under note 3) where, if unavoidable costs of meeting a contract exceed the
expected revenue, a provision is recognised immediately through profit and loss.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive
income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Tax due for the current and prior periods is recognised as a liability, to the extent that it has not yet been settled, and as an
asset if the amounts already paid exceed the amount due. The benefit of a tax loss which can be carried back to recover
current tax of a prior period is recognised as an asset.
Current tax assets and liabilities are measured at the amount expected to be paid to/ recovered from taxation authorities,
using the rates/laws that have been enacted or substantively enacted by the balance sheet date.
A deferred tax asset is recognised for deductible temporary differences, unused tax losses and unused tax credits to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised,
unless the deferred tax asset arises from the initial recognition of an asset or liability other than in a business combination
which, at the time of the transaction, does not affect accounting profit or taxable profit.
The carrying amount of deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to
be utilised. Any such reduction is subsequently reversed to the extent that it becomes probable that sufficient taxable profit will
be available.
A deferred tax asset is recognised for an unused tax loss carry forward or unused tax credit if, and only if, it is considered
probable that there will be sufficient future taxable profit against which the loss or credit carry forward can be utilised.
The Company does not currently recognise a deferred tax asset, as near-term taxable profits, against which to offset the
asset, are not considered probable.
DISPLACING DIESEL
79
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
R&D tax credits
The Company’s research and development activities allow it to claim R&D tax credits from HMRC in respect of qualifying
expenditure; these credits are reflected in the statement of comprehensive income in the taxation line.
Pension contributions
The Company operates a defined contribution pension scheme which is open to all employees and makes monthly employer
contributions to the scheme in respect of employees who join the scheme. These employer contributions are capped at 5% of
the employee’s salary and are reflected in the statement of comprehensive income in the period for which they are made.
The amount recognised in the period is the contribution payable in exchange for services rendered by employees during
the period.
3. Critical accounting judgments and key sources of estimation uncertainty
In the preparation of the financial statements, management makes certain judgments and estimates that impact the financial
statements. While these judgments are continually reviewed, the facts and circumstances underlying these judgments may
change, resulting in a change to the estimates that could impact the results of the Company. In particular:
Critical accounting judgments
The following are the judgments made by management in applying the accounting policies of the Company that have the
most significant effect on the financial statements:
Customer contracts and revenue recognition
Customer contracts typically include the provision of goods or services related to the provision of off-grid power generated
from the conversion by fuel cells of hydrogen to electricity.
Customer agreements can be complex, involve multiple legal documents and have a duration covering multiple accounting
periods including different performance obligations and payment terms designed to manage cash flow rather than the
underlying arm’s length transaction price. Management uses judgment to identify the specific performance obligations and
allocate the total expected revenue to the identified performance obligations. These judgments are made based on the
interpretation of key clauses and conditions within each customer contract.
Project reviews covering cost forecasts and technical progress are monitored periodically to ensure that any potential losses
are recognised immediately in the accounts in accordance with IAS 37.
Capitalisation of development expenditure
The Company uses the criteria of IAS 38 to determine whether development expenditure should be capitalised. Management
identifies separately non-recurring engineering, design costs and prototype costs incurred to develop demonstration units
used in marketing activities and customer trials. Management believes that the Development Expenditure will continue
to support marketing and customer trials for the foreseeable future. This assessment relies upon judgments about
future customer behaviour taking in to account the feedback received from prospective customers and future product
improvements which influence the economic useful life and residual value of said assets.
For the current year, all development costs have been expensed as they do not yet meet all six of the criteria set out within the
policy (see note 2) on development costs.
Following the end of the financial year, the Company’s Technical Advisory Board (TAB) reviewed the 38 technical and
commercial projects that had incurred expenses during the financial year. Of these, 17 were classified as research projects
and therefore unable to be capitalised under IAS 38. Eight projects were commercial in nature and expenses were therefore
treated as cost of sales. Two projects were discontinued and thus did not qualify for capitalisation. Four projects did not
demonstrate future economic benefits. One project was not completed due to lack of budget, one project was out-of-scope
for intangible assets and to be assessed under IAS 16 Tangible Assets and one project was deemed not to be below the
threshold to warrant capitalisation. There was an inability to accurately measure the cost reliably for four projects.
Key source of estimation uncertainty
Share-based payments
Certain employees (including Directors and senior Executives) of the Company receive remuneration in the form of share-
based payment, whereby employees render services as consideration for equity instruments (equity-settled transactions).
80
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC The fair value is determined using either the Black-Scholes valuation model or a Monte Carlo model for market-based
conditions. Both are appropriate for considering the effects of the vesting conditions, expected exercise period and the
dividend policy of the Company.
The cost of equity-settled transactions is accrued, together with a corresponding increase in equity over the period the
Directors expect the performance criteria will be fulfilled. For market performance criteria this estimate is made at the time of
grant considering historic share price performance and volatility. For non-market-based performance criteria, an estimate is
made at the time of grant and reviewed annually thereafter considering progress on the operational objectives set, plans and
budgets.
The estimation uncertainty relating to share-based payments is not at risk of material change in future years other than in
relation to management’s estimate of the extent to which the non-market-based performance criteria will be met.
Onerous contracts
Throughout the year, the performance of each open contract is reviewed and expected cost of delivering that contract is
compared to the expected revenue from doing so. Where the expected costs suggest a loss the contract is treated as an
onerous contract and a provision is recognised immediately through the profit and loss. No such provisions were made.
4. Segmental analysis
Operating segments are determined by the chief operating decision maker based on information used to allocate
the Company’s resources. The information as presented to internal management is consistent with the Statement of
Comprehensive Income. It has been determined that there is one operating segment, the development of fuel cells. In the year
to 31 October 2023, the Company operated mainly in the United Kingdom. All non-current assets are in the United Kingdom.
Revenue for the period was all generated from fuel cell systems.
5. Revenue
Revenue from contracts with customers
Rental revenue
Other revenue
Being:
Cash consideration
Consideration in kind
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
137
90
227
161
66
227
225
357
582
367
215
582
One customer (FY22: one customer) accounted for more than 10% of revenue:
Customer A
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
£000
130
%
57.1
£000
475
%
81.6
The majority of the other revenue relates to sales of hydrogen to the rentee of the fuel cell generators.
Unsatisfied performance obligations were:
31 October 2022
31 October 2023
Total
£000
96
—
Within one year
£000
Within 2 to 5 years
£000
96
—
—
—
The aggregate amount of the transaction price allocated to contracts that are fully unsatisfied as of 31 October 2023 was £Nil
(2022: £96,000).
The consideration in kind relates to marketing services received from the customer and fair valued in accordance with the
contract.
DISPLACING DIESEL
81
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
6. Operating costs
Year ended 31 October 2023
Year ended 31 October 2022
Qualifying
R&D spend
£000
Note
Indirect
£000
Total
£000
Qualifying
R&D spend
£000
Indirect
£000
Total
£000
Product development costs
Materials
Payroll costs
Payroll (excluding directors)
Directors’ costs
Other employment costs
Other administrative expenses
Occupancy costs
Other administrative expenses
Non-cash costs
Amortisation of intangible assets
Depreciation of right-of-use assets
Depreciation of tangible fixed
assets
Less depreciation of rental asset
charged to cost of sales
Consideration in kind
Share-based payments charge
3,349
3,349
4,361
151
220
1,330
1,330
2,329
1,744
813
4,732
4,886
214
192
670
2,178
406
2,848
4,679
4,679
6,690
1,895
1,033
9,618
884
2,370
3,254
110
455
—
—
—
—
—
—
—
110
455
1,099
1,099
(65)
66
778
(65)
66
778
2,443
2,443
4,654
4,654
3,660
—
251
451
451
1,247
1,642
796
5,105
5,105
4,907
1,642
1,047
3,911
3,685
7,596
—
440
440
772
772
2,310
3,082
2,750
3,522
—
—
—
—
—
—
—
474
379
474
379
994
994
(218)
215
1,682
3,526
(218)
215
1,682
3,526
8,487
11,507
19,994
9,005
10,744
19,749
82
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC 7. Other employment costs
External consultants
Recruitment costs
Private Healthcare and Life Insurance
Other
8. Other administrative expenses
Professional fees
Audit and tax costs
Information technology
Travel & entertainment
Insurance
Other
Fees paid to the auditors included within the operating costs were:
Audit
Other assurance services
9. Employee numbers and costs, including directors
The average number of employees in the year were:
Support, operations and technical
Directors
The aggregate payroll costs for directors and employees were:
Wages and salaries
Social security
Employers’ pension contributions
Equity-settled share-based payment expense
DISPLACING DIESEL
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
521
375
108
29
161
704
101
81
1,033
1,047
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
619
237
750
177
417
170
889
312
753
486
260
50
2,370
2,750
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
218
17
244
9
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
113
7
120
77
7
84
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
7,290
1,000
295
8,585
778
9,363
5,961
392
196
6,549
1,682
8,231
83
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
10. Directors’ costs
Directors’ emoluments
Short-term employee benefits:
Wages and salaries including bonuses
Accrual for untaken holiday
Other compensation
Social security
Post-employment benefits:
Defined contribution pension plans
Share-based payments
Total remuneration
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
1,526
1
73
278
1,878
46
1,924
629
2,553
1,380
37
77
98
1,592
50
1,642
1,474
3,116
Social security and accrued holiday pay are included in the table above and reconcile to note 9.
Aggregate gains made by directors on the exercise of share options and warrants was £129,225.
Highest paid director
Wages and salaries
Other compensation
Employers’ pension contributions
11. Net finance income/(cost)
Lease interest
Exchange rate differences
Bank charges
Total finance cost
Bank interest receivable
Net finance income
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
601
44
645
16
661
538
43
581
16
597
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
(69)
22
(6)
(53)
512
459
(38)
21
(2)
(19)
143
124
84
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC 12. Taxation
Recognised in the statement of comprehensive income
R&D tax credit – current year
R&D tax credit – prior year
Total tax credit
Reconciliation of effective tax rates
Loss before tax
Tax using the domestic rate of corporation tax at 22.52% (2022: 19%)
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
2,088
(2)
2,086
3,050
(8)
3,042
(19,561)
4,405
(19,488)
3,703
Effect of:
Change in unrecognised deferred tax resulting from tax losses
(2,443)
(1,767)
Non-deductible items
Depreciation in excess of capital allowances
R&D enhanced deduction on qualifying R&D expenditure
R&D rate adjustment on surrendered losses
R&D tax credit – prior year
Total tax credit
Potential deferred tax assets have not been recognised but are set out below:
Property, plant and equipment and intangible assets
Share-based payments
Other differences
Losses carried forward
Unrecognised deferred tax assets
(43)
(6)
1,959
(1,784)
(2)
2,086
101
(299)
2,259
(947)
(8)
3,042
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
431
57
11
14,389
14,888
(187)
477
—
12,037
12,327
The cumulative tax losses in the amount of £57.6 million (2022: £47.6 million) that are available indefinitely for offsetting against
future taxable profits have not been recognised as the Directors consider that it is unlikely that they will be realised in the
foreseeable future.
The 2021 Finance Act increased the UK corporation tax rate to 25% from 1 April 2023, which will affect any future tax charges.
13. Loss per share
The calculation of the basic loss per share is based upon the net loss after tax attributable to ordinary shareholders and a
weighted average number of shares in issue for the year.
Basic loss per share (pence)
Diluted loss per share (pence)
Loss attributable to equity shareholders £000
Weighted average number of shares in issue
Diluted earnings per share
Year ended
31 October 2023
Year ended
31 October 2022
(2.36)
(2.36)
(2.24)
(2.24)
(£17,475)
(£16,446)
741,451
734,745
As set out in note 24, there are share options and warrants (accounted for under IFRS 2: Share based payments) outstanding
as at 31 October 2023 which, if exercised, would increase the number of shares in issue. Given the losses for the year, there is no
dilution of losses per share in the year ended 31 October 2023 nor the previous year.
DISPLACING DIESEL
85
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
14. Intangible assets
Cost
At 1 November 2021
Additions
At 31 October 2022
Additions
Disposals
At 31 October 2023
Amortisation
At 1 November 2021
Charge for the year
Impairment charge
At 31 October 2022
Charge for the year
Disposals
At 31 October 2023
Net book value
At 31 October 2022
At 31 October 2023
Development
costs
£000
229
—
229
—
(229)
—
74
34
121
229
—
(229)
—
—
—
Patents
£000
886
334
1,220
63
—
1,283
384
422
173
979
70
—
1,049
241
234
Commercial
rights
£000
Total intangible
assets
£000
121
—
121
—
—
121
33
18
—
51
40
—
91
70
30
1,236
334
1,570
63
(229)
1,404
491
474
294
1,259
110
(229)
1,140
311
264
86
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC 15. Right-of-use assets
Cost
At 1 November 2021
Additions
At 31 October 2022
Additions
Disposals
At 31 October 2023
Depreciation
At 1 November 2021
Charge for the year
At 31 October 2022
Charge for the year
Disposals
At 31 October 2023
Net book value
At 31 October 2022
At 31 October 2023
Buildings
£000
1,415
470
1,885
576
(476)
1,985
530
379
909
455
(476)
888
976
1,097
16. Tangible fixed assets
Leasehold
improvements
£000
Decommissioning
Asset
£000
Plant, machinery
and equipment
£000
Assets under
construction
£000
Total
tangible
fixed assets
£000
Cost
At 1 November 2021
Additions
Disposals
At 31 October 2022
Additions
Disposals
At 31 October 2023
Depreciation
At 1 November 2021
Charge for the year
Impairment charge
At 31 October 2022
Charge for the year
Disposals
At 31 October 2023
Net book value
At 31 October 2022
At 31 October 2023
DISPLACING DIESEL
958
1,620
(8)
2,570
985
(9)
3,546
302
444
—
746
648
—
1,394
1,824
2,152
300
—
—
300
—
—
300
265
20
—
285
15
—
300
15
—
3,318
362
(118)
3,562
334
(25)
3,871
1,740
530
255
2,525
436
—
2,961
1,037
910
—
406
—
406
288
—
694
—
—
—
—
—
—
—
406
694
4,576
2,388
(126)
6,838
1,607
(34)
8,411
2,307
994
255
3,556
1,099
—
4,655
3,282
3,756
87
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
17. Inventory
Raw materials
Work-in-progress
Provision
Inventory
31 October 2023
£000
31 October 2022
£000
185
405
(412)
178
173
—
(130)
43
Inventory expensed as cost of sales during the year was £nil (2022 £nil). During the year, £412,000 (2022: £488,000) of
brought forward inventory was written off as research and development costs on projects that did not subsequently meet the
anticipated level of commerciality.
18. Receivables
Trade receivables
VAT receivables
Other receivables
Prepayments
31 October 2023
£000
31 October 2022
£000
107
383
217
524
1,231
142
401
303
314
1,160
There is no significant difference between the fair value of the receivables and the values stated above.
19. Cash and cash equivalents
Cash at bank
Bank deposits
31 October 2023
£000
31 October 2022
£000
303
27,063
27,366
285
39,935
40,220
Cash at bank and bank deposits consist of cash. There is no material foreign exchange movement in respect of cash and cash
equivalents.
Restricted cash of £258,000 (2022: £612,000) is not included within cash and cash equivalents and is held in escrow to support
bank guarantees provided under contractual obligations to suppliers and customers.
20. Payables
Trade payables
Deferred revenue
Other payables
Accruals
31 October 2023
£000
31 October 2022
£000
931
1,423
416
958
3,728
445
1,600
349
1,250
3,644
Included in Accruals as of 31 October 2023 is an amount of £690,000 in relation to bonuses (2022: £514,000).
Deferred revenue under the ABB contract is reduced by the fair value of the warrants granted on the same day,
15 November 2021, as the two contracts are considered to be linked.
88
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC 21. Lease liabilities
Changes in liabilities arising from financing activities:
Opening position
Cash flows
Repayment
Non-cash
Additions
Interest expense
Lease liabilities less than 12 months
Lease liabilities more than 12 months
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
996
906
(516)
(419)
575
69
1,124
471
38
996
31 October 2023
£000
31 October 2022
£000
477
647
1,124
298
698
996
All of the Company’s leases are for the occupancy of the campus at Dunsfold Park and are disclosed as ‘Buildings’ in note 15.
A number of buildings are occupied under licences and these have not been recognised as right-of-use assets. Of the leases
recognised as right-of-use assets, the Company has a commitment on one lease until February 2027 with a break clause in
February 2025. The Company has a commitment on one lease until November 2025 with no break clauses. Two leases were
renewed in January 2023 until January 2026 with no break clauses.
Leases are renewed as opposed to being extended and are granted outside of the 1954 Act. They therefore do not have
security of tenure.
22. Provisions
Balance at 1 November 2021
Utilisation
Balance at 31 October 2022
Additions
Utilisation
Balance at 31 October 2023
National insurance
on unapproved share
options
£000
Decommissioning
provision
£000
353
(353)
—
—
—
—
301
—
301
—
—
301
Total
£000
654
(353)
301
—
—
301
DISPLACING DIESEL
89
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
23. Issued share capital
At 1 November 2021
734,484,668
Ordinary
shares
Share capital
£000
Share premium
before costs of
issue
£000
Costs of
issue
£000
Share premium
net of costs of
issue
£000
734
119,718
(3,269)
116,448
Price
£
—
Exercise of options
14 March 2022
Exercise of options
5 July 2022
Exercise of PSP award
21 July 2022
Exercise of options
26 July 2022
Exercise of options
7 September 2022
At 1 November 2022
Issue of shares
5 April 2023
Exercise of options
1 June 2023
Exercise of warrants
14 June 2023
Exercise of PSP award
22 September 2023
60,000
9,240
110,000
12,320
583,169
583
60,000
9,240
53,334
735,351,171
8,213
—
10,000,000
2,000,000
10,000
—
900,000
44,325
255,136
746,516,307
255
—
—
—
1
—
—
9
12
—
9
8
—
—
—
—
—
9
12
1
9
9
735
119,756
(3,269)
116,487
10
—
1
–
1,990
—
43
—
—
—
—
—
1,990
—
43
—
746
121,789
(3,269)
118,520
The Company considers its capital and reserves attributable to equity shareholders to be the Company’s capital. In managing
its capital, the Company’s primary long-term objective is to provide a return for its equity shareholders through capital growth.
Going forward the Company will seek to maintain a gearing ratio that balances risks and returns at an acceptable level and to
maintain a sufficient funding base to enable the Company to meet its working capital needs. The Company has no debt, other
than property leases, and therefore a target debt to equity ratio is not relevant at the time.
Share premium is shown before the permitted deduction of costs of issue. After such deduction the value equals £118,520,000.
Details of the Company’s capital are disclosed in the statement of changes in equity.
There have been no other significant changes to the Company’s management objectives, policies and processes in the year
nor has there been any change in what the Company considers to be capital.
24. Share-based payments
Share-based payment charge:
Employee Share Option Plan
Employee Performance Share Plan
Warrants
SAYE
31 October 2023
£000
31 October 2022
£000
48
612
—
118
778
193
1,400
70
19
1,682
90
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC Employee Share Option Plan
The establishment of the Employee Share Option Plan was approved by the Board on 1 August 2018 and amended on 10
October 2018. The Plan is designed to attract, retain and motivate employees. Under the Plan, participants can be granted
options which vest unconditionally or conditionally upon achieving certain performance targets. Participation in the Plan is
solely at the Board’s discretion and no employee has a contractual right to participate in the Plan or to receive any guaranteed
benefits.
Options are granted under the Plan for no consideration and carry no dividend nor voting rights.
When exercisable, each option is convertible into one ordinary share.
Further details are discussed within the Remuneration Committee Report.
Set out below are summaries of options granted under the Plan:
At 1 November
Granted during the year
Exercised during the year
Lapsed during the year
Amended during the year:
Options at original exercise price
Options at rebased exercise price
At 31 October
Vested and exercisable at 31 October
Average exercise
price per
share option
2023
£
0.35
0.16
0.09
0.17
0.62
0.11
0.32
Number
of options
2023
13,717,167
2,125,000
(10,000)
(2,861,667)
(1,000,000)
1,000,000
12,970,500
9,630,500
Average exercise
price per
share option
2022
0.35
0.19
0.14
0.35
—
—
Number
of options
2022
14,952,167
215,000
(283,334)
(1,166,666)
—
—
0.35
13,717,167
11,700,637
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
Expiry date
7 November 2012
07 November 2022
2 December 2013
01 December 2023
17 July 2015
17 July 2025
10 September 2018
01 August 2024
15 October 2018
15 October 2024
31 December 2019
20 April 2020
24 June 2021*
9 June 2023*
9 June 2023*
9 June 2023
4 July 2022
27 April 2023
20 April 2030
20 April 2030
28 June 2031
28 June 2031
28 June 2031
28 June 2031
04 July 2032
27 April 2033
* Award amended by Deed of Variation in 2023.
Exercise price
£
0.3575
0.3400
0.2200
0.0880
0.0880
0.1635
0.1540
0.6170
0.1000
0.1250
0.1526
0.1900
0.0188
Share options
2023
—
120,000
6,000,000
190,000
2,500,000
—
820,500
—
500,000
500,000
1,500,000
215,000
625,000
12,970,500
Share options
2022
95,000
120,000
6,000,000
216,667
2,500,000
2,750,000
820,500
1,000,000
—
—
—
215,000
—
13,717,167
DISPLACING DIESEL
91
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
The table below sets out the inputs used in determining the fair value of the grants of options per the previous table as well
as the expense recognised in the accounts in the current year. The grants in the previous table are linked below based on the
exercise price and grant date.
Average
grant
date
share
price
£
Exercise
price
£
Average
expected
volatility
per annum
Average risk-
free interest
rate per
annum
Average
dividend
yield per
annum
Average
implied
option
life in
years
Average
fair value per
option
£
Amount
expenses in
2023
£000
Grant date
31 December 2019
0.1635
0.1635
95.50%
0.54%
0.00%
4 July 2022
0.1900
0.1900
95.00%
1.83%
0.00%
27 April 2023
0.1880
0.1882
78.00%
3.82%
0.00%
09 June 2023
0.1000
0.1682
72.00%
4.51%
0.00%
09 June 2023
0.1000
0.1682
72.00%
4.51%
0.00%
09 June 2023
0.1250
0.1682
72.00%
4.51%
0.00%
09 June 2023
0.1250
0.1682
72.00%
4.51%
0.00%
09 June 2023
0.1530
0.1682
72.00%
4.51%
0.00%
09 June 2023
0.1530
0.1682
72.00%
4.51%
0.00%
Total charge for the year (2022: £193,000)
2.0
3.0
3.0
0.7
0.9
1.7
1.9
2.7
2.9
0.8100
0.1140
0.0990
0.0791
0.0825
0.0817
0.0847
0.0856
0.0883
—
8
11
3
3
9
3
3
8
48
Employee Performance Share Plan
The establishment of the Employee Performance Share Plan was approved by the Board on 1 September 2021. The Plan
is designed to attract, retain and motivate employees. Under the Plan, participants can be granted options which vest
unconditionally or conditionally upon achieving certain performance targets. Participation in the Plan is solely at the Board’s
discretion and no employee has a contractual right to participate in the Plan or to receive any guaranteed benefits. Award
holders are not required to make payment for the grant of an award unless the board determines otherwise.
Options are granted under the Plan for no consideration and carry no dividend nor voting rights.
When exercisable, each option is convertible into one ordinary share.
Set out below are summaries of options granted under the Plan:
At 1 November
Granted during the year
Exercised during the year
Lapsed during the year
At 31 October
Vested and exercisable at 31 October
Average exercise
price per
share option
2023
£
0.001
0.001
0.001
0.001
0.001
Average exercise
price per
share option
2022
—
0.001
0.001
0.001
0.001
Number
of options
2023
6,131,266
4,664,000
(255,136)
(2,939,226)
7,600,904
—
Number
of options
2022
—
7,493,317
(583,169)
(778,882)
6,131,266
—
92
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
19 November 2021
12 July 2022
1 June 2023
Expiry
date
19 November 2031
12 July 2032
1 June 2033
Exercise
price
£
0.001
0.001
0.001
Share
options
2023
620,970
2,315,934
4,664,000
Share
options
2022
2,971,582
3,159,684
—
7,600,904
6,131,266
The table below sets out the inputs used in determining the fair value of the grants of options per the previous table as well as
the expense recognised in the accounts in the current year. The grants in the previous table are linked below based on the
exercise price and grant date.
Average
grant
date
share
price
Pence
53.80
53.80
53.80
20.70
20.70
17.91
17.91
Exercise
price
Pence
0.001
0.001
0.001
0.001
0.001
0.001
0.001
Average
expected
volatility
per annum
Average risk-
free interest
rate per
annum
Average
dividend
yield per
annum
76.00%
76.00%
76.00%
95.00%
95.00%
74.00%
74.00%
0.05%
0.00%
0.35%
0.00%
0.05%
0.00%
1.76%
0.00%
1.76%
0.00%
4.29%
0.00%
4.29%
0.00%
Average
implied
option
life in
years
0.40
1.40
3.00
3.00
3.00
3.00
3.00
Grant date
19 November 2021
19 November 2021
19 November 2021
15 July 2022
15 July 2022
01 June 2023
01 June 2023
Total charge for the year (2022: £1,400,000)
Average
fair value per
option
Pence
Amount
expenses in
2023
£000
0.43
0.42
0.45
12.70
16.60
8.79
10.92
—
205
133
91
119
29
35
612
Three grants were made on 19 November 2021. The first two, of the three disclosed above, related to the Transitional LTIP, and
was made in two tranches. The first tranche had a risk free rate of 0.05% whilst the second tranche had a risk-free rate of
0.35%. The third, of the three above, related to the PSP LTIP and had a risk free rate of 0.05%.
DISPLACING DIESEL
93
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
SAYE
Save-as-you-earn (SAYE) ‘ Sharesave’ schemes are open to all eligible employees. The SAYE schemes allows eligible
employees to commit to making a deduction from salary on a monthly basis over three years. At the end of the three-year
period, employees can purchase the Company’s ordinary shares of 0.1 pence each (“Ordinary Shares”) using the funds saved.
The first AFC Energy SAYE scheme was launched in August 2022 at an exercise price of 20.48 pence per Ordinary Share,
representing a 20% discount to the closing market price of the Ordinary Shares prior to the scheme being launched on 3
August 2022.
The second AFC Energy SAYE scheme was launched in September 2023 at an exercise price of 14.304 pence per Ordinary
Share, representing a 20% discount to the closing market price of the Ordinary Shares prior to the scheme being launched on
6 September 2022.
The discounts to the closing market prices are in line with the limits of the SAYE scheme as defined by HMRC.
Average
exercise price
per option
2023
Pence
20.48
14.30
17.44
—
Number of
options
2023
2,007,400
1,937,201
3,944,601
—
Expiry
date
Exercise
price
Average
exercise price
per option
2022
£
—
20.48
20.48
—
Share
options
2023
Number of
options
2022
—
2,007,400
2,007,400
—
Share
options
2022
31 March 2026
20.480
(2,007,400)
2,007,400
30 April 2027
14.304
1,937,201
—
1 November
Granted during the year
31 October
Vested and exercisable at 31 October
Grant date
3 August 2022
19 October 2023
Grant date
Average
grant
date
share
price
Pence
Exercise
price
Pence
Average
expected
volatility
per
annum
Average
risk-free
interest
rate per
annum
Average
dividend
yield per
annum
3 August 2022
20.480
25.60
95.00%
2.93%
0.00%
19 October 2023
14.304
13.97
73.00%
4.72%
0.00%
Total charge for the year (2022: £19,000)
Average
implied
option
life in
years
3.08
3.03
Average
fair value
per
option
Pence
17.700
7.060
Amount
expenses in
2023
£000
115
3
118
25. Financial instruments
Warrants
While the Board issues share options to employees, the Board has the discretion to award warrants from time to time to
non-employees, such as non-executive directors and third parties. Typically, warrants are granted and vest upon certain
performance targets. Grant of warrants is solely at the Board’s discretion.
Warrants are granted for no consideration and carry no dividend nor voting rights. When exercisable, each warrant is
convertible into one ordinary share.
94
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC Set out below are summaries of warrants granted under the Plan:
1 November
Granted during the year
Exercised during the year*
Lapsed during the year
31 October
Average
exercise price
per warrant
2023
£
Number of
warrants
2023
Average
exercise price
per warrant
2022
£
0.540
15,702,720
—
—
0.049
(900,000)
0.210
(3,000,000)
0.51
0.59
—
—
Number of
warrants
2022
8,900,000
6,802,720
—
—
0.670
11,802,720
0.54
15,702,720
Vested and exercisable at 31 October
3,101,300
4,001,300
The warrants exercised during the year all relate to a serving non-executive director and are discussed further within the
Remuneration Committee Report.
Average
grant
date
share
price
Pence
Warrant
price
Pence
Average
expected
volatility
per
annum
Average
risk-free
interest
rate per
annum
Average
dividend
yield per
annum
Average
implied
warrant
life in
years
Average
fair value
per
warrant
Pence
Amount
expenses in
2023
£’000
Grant date
13 October 2020
19.5
18.56
102.76%
(0.02)%
0.00%
1
7.01
—
Total charge for the year (2022: £70,000)
Average
grant
date
share
price
Pence
58.8
58.8
58.8
Warrant
price
Pence
58.8
58.8
58.8
Average
expected
volatility
per
annum
59.1%
59.1%
59.1%
Average
risk-free
interest
rate per
annum
Average
dividend
yield per
annum
0.65%
0.00%
0.65%
0.00%
0.65%
0.00%
Average
implied
warrant
life in
years
Average
fair value
per
warrant
Pence
Accounted
as equity in
2023
£000
2
2
2
6.3
11.3
9.9
—
—
—
Grant date
15 November 2021
15 November 2021
15 November 2021
Accounted as equity (2022: £576,000)
In the case of the ABB warrants, the warrant life is two years from the date of vesting. The first tranche of 3.4 million warrants
have fully vested and expired on 4 February 2024 without having been exercised. Under the revised agreement signed on
28 March 2023, ABB will invest the £2.0 million balance into newly issued share capital, which means that the original
milestones 1 and 2 will no longer apply and so the related warrants will not vest and therefore expire in due course.
Warrants outstanding at the end of the year have the following expiry dates and exercise prices.
Grant date
9 September 2019
19 October 2020
19 October 2020
19 October 2020
13 January 2021
15 November 2021
15 November 2021
15 November 2021
Expiry
date
9 September 2029
13 October 2021
13 April 2021
13 October 2022
13 March 2025
4 February 2024
24 months after vesting
24 months after vesting
Exercise
price
0.050
0.195
0.210
0.230
0.770
0.590
0.590
0.590
Warrants
2023
Warrants
2022
—
—
—
—
900,000*
1,000,000*
1,000,000*
1,000,000*
5,000,000
5,000,000*
3,401,360
3,401,360
1,700,680
1,700,680
1,700,680
1,700,680
11,802,720
15,702,720
In common with other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note
describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks is presented throughout these financial statements.
* These warrants represent share-based payments which have been accounted for under IFRS 2 and disclosures have been made which are required for share based
payments and can be found in note 24.
DISPLACING DIESEL
95
FINANCIAL STATEMENTSAnnual Report 2023 NOTES FORMING PART OF THE FINANCIAL STATEMENTS
Principal financial instruments
The principal financial instruments used by the Company, from which financial instrument risk arises, are as follows:
Financial instruments held at amortised cost:
Cash and cash equivalents
Receivables
Total financial assets held at amortised cost
Payables
Leases
Total financial liabilities held at amortised cost
Note
19
18
20
21
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
27,366
324
27,690
2,304
1,124
3,428
40,220
445
41,380
2,044
996
3,040
There is no difference between the fair value and book value of financial instruments.
The Company does not enter forward exchange contracts or otherwise hedge its potential foreign exchange exposure. The
Board monitors and reviews its policies in respect of currency risk on a regular basis.
VAT receivables and prepayments have been removed from financial assets and deferred revenue from financial liabilities.
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into three levels based on
the degree to which the fair value is observable as defined by IFRS 7:
Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets and
liabilities.
Level 2 fair value measurements are those derived from inputs, other than quoted prices included within Level 1, that are
observable either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that
are not based on observable market data.
Other than the ABB warrants, granted on 15 November 2021, which also incorporate managements inputs to the fair valuation,
all financial instruments are Level 1 and none have been transferred between Levels during the year.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Company’s risk management objectives and policies
and, while retaining ultimate responsibility for them, it has delegated part of the authority for designing and operating
processes that ensure the effective implementation of the objectives and policies to the Company’s finance team. The Board
receives reports from the financial team through which it reviews the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce ongoing risk as far as possible without unduly affecting
the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.
Credit risk
Credit risk arises principally from the Company’s other receivables and cash and cash equivalents. It is the risk that the
counterparty fails to discharge its obligation in respect of the instrument. The maximum exposure to credit risk equals the
carrying value of these items in the financial statements as shown below:
Cash and cash equivalents
Receivables
The Company’s principal other receivables arose from:
a) customers, and
b)
trade and other receivables
Year ended
31 October 2023
£000
Year ended
31 October 2022
£000
27,366
324
40,220
445
96
DISPLACING DIESEL
FINANCIAL STATEMENTSAFC Energy PLC Credit risk with cash and cash equivalents is reduced by placing funds with banks with acceptable credit ratings and
government support where applicable and on term deposits with a range of maturity dates. At the year end, most cash were
temporarily held on short-term deposit. The credit risk provision is estimated on a case by case basis taking into account
public information of the counterparty and payment history and no loss is expected. No expected credit loss accrual has been
made as at 31 October 2023 and 2022 as they are estimated to be de minimis.
Liquidity risk
Liquidity risk arises from the Company’s management of working capital and the amount of funding required for the
development programme. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall
due. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become
due.
The principal liabilities of the Company are trade and other payables in respect of the ongoing product development
programme. Trade payables are all payable within two months. The Board receives cash flow projections on a regular basis as
well as information on cash balances.
The following table shows the Company’s financial liabilities by relevant maturity grouping based on contractual maturities.
The amounts included in the analysis are contractual, undiscounted cashflows.
31 October 2023
Trade payables
Lease liabilities
Total financial liabilities
31 October 2022
Trade payables
Lease liabilities
Total financial liabilities
Less than
one year
£000
2,304
518
2,822
Less than
one year
£000
2,044
328
2,372
One to
two years
£000
—
518
518
One to
two years
£000
—
308
308
Tow to
five years
£000
Total contracted
cash flows
£000
—
151
151
2,304
1,187
3,491
Tow to
five years
£000
Total contracted
cash flows
£000
—
423
423
2,044
1,059
3,103
Carrying
amount
£000
2,304
1,124
3,428
Carrying
amount
£000
2,044
996
3,040
See also note 21, which sets out the lease liabilities for less than 12 months and more than 12 months.
Interest rate risk
The Company is exposed to interest rate risk in respect of surplus funds held on deposit and, where appropriate, uses fixed
interest term deposits to mitigate this risk.
26. Related party transactions
There were no transactions with any related parties during the year ended 31 October 2023 (2022: £Nil) other than key
management compensation, details of which can be found in note 10.
27. Ultimate controlling party
There is no ultimate controlling party.
28. Events occurring after the end of the reporting period
See within the Directors’ Report on page 41.
DISPLACING DIESEL
97
FINANCIAL STATEMENTSAnnual Report 2023 COMPANY INFORMATION
Executive directors
BOND, Adam Steven
DIXON-CLARKE, Peter
GIBSON, James Hay
LEWIS, Graeme
Appointed
1-Jun-12
1-Dec-22
6-Feb-17
27-Feb-20
Non-executive directors
AGNEW, Gerald Daniel, Dr
Appointed
9-Sep-19
BIDDULPH, Monika, Dr
BULLARD, Gary Bruce
MANGION, Joseph Bernard
NEALE, Duncan John
3-Dec-21
15-Apr-21
5-Dec-17
1-Aug-23
Company Secretary
LEWIS, Graeme Robert
DIXON-CLARKE, Peter
KEANE, Brendan James
Appointed
2-Apr-19
1-Dec-22
9-Oct-23
Registered Office
Unit 71.4 Dunsfold Park, CRANLEIGH, GU6 8TB
Resigned
9-Jun-23
30-Nov-22
Resigned
31-Jul-23
Resigned
1-Dec-22
9-Oct-23
Bankers
Barclays Bank Plc, 40/41 High Street, CHELMSFORD, CM1 1BE
Joint Broker
Zeus Capital Limited, 82 King Street, MANCHESTER, M2 4QW
RBC Capital Markets, 100 Bishopsgate, LONDON, EC2N 4AA
AIM Nominated Adviser and Joint Broker
Peel Hunt LLP, 100 Liverpool Street, LONDON, EC2M 2AT
Solicitors to the Company
Memery Crystal LLP 165 Fleet Street London EC4A 2DY
Auditors and reporting accountants
Grant Thornton UK LLP, 30 Finsbury Square, LONDON, EC2A 1AG
Financial PR Advisers
FTI Consulting, 200 Aldersgate Street, LONDON, EC1A 4HD
Registrars
Computershare Limited, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ
98
DISPLACING DIESEL
AFC Energy PLCOTHER INFORMATION
This report was printed in the UK by Pureprint Group, a CarbonNeutral®
company. This document was printed utilising pureprint® environmental
printing technology and 100% vegetable-based inks. 99% of
the dry waste and 95% of cleaning solvents associated with the
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Photos by Andy Wilson Design by JacksonBone Ltd
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AFC Energy PLC
Unit 71.4 Dunsfold Park
Stovolds Hill
Cranleigh
Surrey
GU6 8TB
United Kingdom
www.afcenergy.com